Mid-sized IT services firm Persistent Systems has grown its revenues by 29% in the just concluded fiscal on the back of better business from its larger clients while improving profit margin by 21% mostly on account of increasing share of intellectual-property led revenue.
For the year ended March 31, the Pune-based outsourced software product developer recorded revenues of Rs776 crore compared with Rs594 crore in the previous fiscal while its profit after tax grew to Rs140 crore, from Rs115 crore earlier.
Top client revenue increased sharply from 11% of revenues in 2010 to 15.4% in the just concluded quarter.
What the rosy full-year numbers masked was a sharp decline in profits during the last three months ended March 31, on account of the wage hikes given to employees. As salaries rose by an average of 10%, Persistent, which counts International Business Machines (IBM) and Microsoft Corp as clients, took a hit of Rs7 crore during the quarter.
For the fiscal ending March 31, 2012, Persistent has guided for $220 million in revenues while the net profit margin will decline to about 14-15% of total revenues, compared to 18% in the just concluded quarter.
The margin erosion, according to chairman and managing director Anand Deshpande, is primarily on account of higher wage expenses and higher tax rate — expected to jump nearly four-fold from about 8% in fiscal 2011 to about 30% in fiscal 2012.
“The tax rate increase is more or less factored-in by the street, so was the additional expense on account of wage hikes,” said a Mumbai-based analyst with a foreign brokerage. “Outside of that, the announced numbers are in the positive territory.”
Persistent, which gets about 85% revenues from the US, exited the fiscal with 6,360 employees on its rolls and looks to recruit at least 1,000 from the campuses in the current fiscal.
The fresher addition, at the so-called base of the employee pyramid, will help keep the wage expenses in check according to the management.
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