PERSISTENT - Persistent Sys

📊 NSE: PERSISTENT 🏢 Computers - Software - Large 📅 Last Updated: 12/14/2025 10:58

💰 Financial Performance

Revenue Growth by Segment

In Q2 FY26, the Banking, Financial Services & Insurance (BFSI) segment grew 30.7% YoY, Healthcare & Life Sciences (HLS) grew 12.4% YoY, and Software, Hi-Tech & Emerging Industries grew 14.1% YoY. Total revenue reached $406.2 million (INR 3,580.72 Cr), up 17.6% YoY in USD terms and 23.6% YoY in INR terms.

Geographic Revenue Split

Persistent is heavily concentrated in North America, which contributed 79.8% of revenue in Q2 FY26. Europe contributed 9.3%, India 9.2%, and the Rest of the World (ROW) 1.7%. This concentration exposes the company to region-specific challenges in the US market.

Profitability Margins

EBIT margin reached 16.3% in Q2 FY26, a 230 basis point improvement YoY. PAT margin stood at 13.2% (INR 471.47 Cr), representing a 45.1% YoY growth in absolute profit terms. The improvement was driven by cost optimization and favorable currency movements.

EBITDA Margin

Operating profit margins (OPM) were 16.3% in FY2024 but faced pressure in H1 FY25, declining to 14.7% due to rapid ramp-ups in the HLS vertical. However, management targets a 200-300 basis point improvement in EBIT margins over the next 2-3 years through operational efficiency.

Capital Expenditure

Increased Capex on facilities and IT infrastructure impacted EBIT margins by 20 basis points in Q2 FY26. Total cash and investments stood at INR 2,495.72 Cr as of September 30, 2025.

Credit Rating & Borrowing

Persistent maintains a strong credit profile with an interest coverage ratio of 25.5x. Ratings could be downgraded if Total Debt/OPBITDA exceeds 1.25x on a sustained basis. The company maintains a low debt-to-tangible net worth ratio of 0.1x.

⚙️ Operational Drivers

Raw Materials

As an IT services firm, the primary 'raw material' is human capital. Employee costs are the largest expense, with utilization rates at 88.2% in Q2 FY26 (a 50 bps decline QoQ) and TTM attrition at 11.5% in FY2024.

Import Sources

Not applicable for IT services; however, talent is primarily sourced from India (9.2% revenue contribution) and the US (79.8% revenue contribution).

Key Suppliers

Not disclosed in available documents as the business is service-oriented rather than manufacturing-based.

Capacity Expansion

The company is expanding its physical facilities and IT infrastructure, which increased depreciation and amortization by 20 basis points in Q2 FY26. Utilization is targeted at an optimum level of 83-85%.

Raw Material Costs

Employee costs are the primary driver; utilization of 88.2% and a focus on offshoring (which added 30 bps to margins in Q2 FY26) are key cost management strategies.

Manufacturing Efficiency

Efficiency is measured by employee utilization, which stood at 88.2% in Q2 FY26. The company also improved billed DSO by 2 days to 54 days, enhancing cash flow efficiency.

Logistics & Distribution

Not applicable for IT services.

📈 Strategic Growth

Expected Growth Rate

17.60%

Growth Strategy

Growth is driven by a $1.96 billion TTM Total Contract Value (TCV) and $1.39 billion Annual Contract Value (ACV). Strategy includes scaling the HLS and BFSI verticals, tuck-in acquisitions for niche capabilities, and the 'SASVA' AI platform to win deals with lower manpower costs.

Products & Services

Software engineering, IT consultancy, GenAI solutions, cloud services, and the SASVA AI platform.

Brand Portfolio

Persistent Systems, SASVA (AI Platform).

New Products/Services

The SASVA AI platform is a key new offering, enabling the company to win competitive deals by utilizing AI-driven automation to reduce project headcount.

Market Expansion

Targeting a $2 billion revenue run rate (currently at $1.6 billion annualized). Expansion is focused on deepening relationships with the top 10 clients, who contribute 43.2% of revenue.

Market Share & Ranking

Persistent is described as having a 'moderate scale' compared to large domestic IT players, which restricts its pricing flexibility.

Strategic Alliances

The company focuses on alliances and partnerships to advance its AI strategy and Asia-PAC market presence.

🌍 External Factors

Industry Trends

The industry is shifting toward GenAI adoption. Persistent is positioning itself through its SASVA platform to improve delivery efficiency and win deals against larger competitors.

Competitive Landscape

Competes in an intensely competitive IT services industry where pricing flexibility is limited by the scale of larger domestic peers.

Competitive Moat

Moat is built on niche capabilities in HLS and BFSI and its proprietary AI platform (SASVA). However, the moat is challenged by intense competition and the moderate scale of operations compared to Tier-1 IT firms.

Macro Economic Sensitivity

Highly sensitive to US macroeconomic conditions and IT spending cycles, as 80% of revenue is US-based.

Consumer Behavior

Clients are increasingly seeking cost-optimization deals and AI-integrated service delivery.

Geopolitical Risks

Exposure to regulatory and legislative changes in the US, India, and Europe. US concentration is the primary geopolitical risk factor.

⚖️ Regulatory & Governance

Industry Regulations

Subject to data privacy laws, labor policies in key markets (US/India), and visa regulations for onsite employees.

Environmental Compliance

Direct exposure to environmental risks is considered 'not material' due to the service-oriented nature of the business.

Taxation Policy Impact

The effective tax rate (ETR) for Q2 FY26 was 23.5%. The company expects the FY26 ETR to remain between 22.5% and 23.5%.

Legal Contingencies

The company reported proper systems for compliance with all applicable laws; no specific high-value pending court cases were quantified in the provided documents.

⚠️ Risk Analysis

Key Uncertainties

Susceptibility to demand softening in the US market and potential margin pressure from rapid onsite hiring for project ramp-ups (which recently pressured HLS margins).