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00:00We start with persistent systems. The IT firm reported a 6% sequential increase in net profit
00:06for the quarter ended September on a year-on-year basis. Net profit surged over 23% driven by the
00:12company's focus on AI-led services as well as the strategy. We spoke to the CEO Sandeep Kalra
00:19about the quarter gone by and his outlook on the second half. Listen into that conversation.
00:24The quarter, as you rightly said, came in well. We had another good, strong revenue growth quarter,
00:3281.4% year-on-year in dollar terms, 20% plus in rupee terms. And on a quarter-on-quarter basis,
00:38it was roughly about 5.3% in dollar terms. Now, this was led by our healthcare life sciences
00:44segment, followed by BFSI. We saw reasonably good growth in both the segments, followed by tech,
00:48which we are seeing a good revival. The EBIT for the quarter also came in healthy,
00:5322.8% year-on-year growth at 14%, which is flat quarter-on-quarter despite the salary increase,
00:59which dings us by about 210 basis points. So, we were able to overcome the negative effect of the
01:05wage hike that we had given effective July 1st. And for you and your viewers, we basically kept
01:11the timeline that we had for the wage hike. We did not defer the wage hikes as some other peers
01:15in our sector have done. So, overall, broadly, a good quarter, good segmental growth across,
01:21and good client growth across. Happy to answer any questions.
01:26I want to start off with the geographical areas because for you, both America and Europe did well.
01:32The belief was that for all companies, product companies, services companies,
01:38US will probably do materially better only after the November election verdict is out of the way,
01:43uncertainties out of the way, clients will take calls on budget there.
01:46What's happening there? Because you seem to have done well.
01:50So, Neeraj, see, in the last several years, if you look at it, there have been many different
01:53phenomena. There was a COVID phenomena, there was a post-COVID, there was a fears of recession,
01:58now it is the US elections. So, all we have to do is, and sincerely, we are a small company in a
02:04much bigger sector, all you have to see is where the customers' minds are at, what is it that they
02:09are looking at. If they are looking at revenue growth versus cost optimization versus saving
02:15from some areas, investing in places like AI and so on and so forth, we have to be able to work
02:20with them and we have to build in the capabilities that we have. If you look at our AI capabilities,
02:25we have been investing in that and that has held us in good stead, good market, bad market,
02:30and so on. So, we are reasonably confident that will be the case going ahead as well.
02:34We don't control the economy, we don't control what happens in the macro in the world,
02:39whether it is in APAC or wherever else, Middle East and so on, but we control our reaction and
02:44so far, as a team, we have done well with our customers and they have grown with us
02:47and we hope that to continue. Yeah, but even sectorally, so not,
02:52US has done well, BFSI has done well, what is this? Is this an up-trending piece? Because most
02:59people were thinking that it will actually trend lower. So, how do you look at BFSI and US
03:05combined? Because that will be a big driver, not just from your perspective, I'm saying,
03:09but from the sectoral perspective. Yeah, from the sectoral perspective, look,
03:14we are seeing some amount of spend easing up. Yeah, the people are worried about the elections,
03:21but you know what, with whoever comes in, the markets have to continue, the people have to
03:26do their business. So, we are definitely seeing some amount of uptick in terms of people looking
03:31beyond the short term and we have been a gainer of that. We have also been a gainer of
03:36cost optimization, we have been a gainer of vendor consolidation and I do think people who are
03:41investing in AI capabilities, et cetera, will continue to gain market share. So, yes, there'll
03:46be a little bit of loosening in the shorter term, longer term, we'll see, but within that, people
03:51who are focused on their customers, on next generation technologies, services, which kind
03:55of add value to their customers, will keep growing. Okay, now, before I come to margins,
04:00a couple of other questions, Sandeep. One of them is on technology. I heard you mention in
04:03your opening remark that tech seems to have starting to perform at the, I think, what,
04:091% sequential growth, but the belief in the commentary that I've read from the analyst
04:13community is that the bottoming out process is underway. It'll probably bottom out in the next
04:16couple of quarters. Is there a dichotomy between what the suite is understanding versus what you're
04:20thinking about? No, so far as if you look at it, we have been investing in our AI platform called
04:26SASVA. We have been evangelizing that with our tech customers. We've got very good traction on
04:31that. We are winning some good large deals, including in the quarter gone by, and we do
04:36believe from what we see, the ramp up will happen over the next two to three quarters big time in
04:41those. So, we are expecting tech sector to kind of turn around for us because tech for us versus
04:47tech for our larger peers are two different things. We are in the heart of the engine. We
04:50are in product engineering. We are their extended teams for product development, maintenance,
04:54professional services, nine yards, whereas tech for our other peers means IT into their CIO
05:00organization, and we are heavily focused on CTO, VP engineering, the business lines, and somewhat
05:06in the CIO organization. So, we are confident that will turn around for us and we'll see a
05:10secular growth across all the three segments. But happens, I mean, bottoming out in the next
05:15couple of quarters or already bottomed out, Sandeep? It's kind of bottomed out. We should see,
05:20you know, obviously December quarter is a furlough quarter. Some of the tech companies
05:23also have furloughs. But if you look at the overall thing from our vantage point,
05:27from our bookings, from our pipeline, I do think it has kind of bottomed out.
05:31But furloughs, you reckon, are similar to what you've seen in the previous year?
05:35So far, yes. But, you know, these things get firmed up towards November and December,
05:40December mid. So, we'll let it flow. From what we see today, the discussions with our customers,
05:44we do believe there'll be similar lines as the last year.
05:47Okay. Operational metrics. Last couple of questions, Sandeep. Operational metrics, margins,
05:52no complaints there. The question only is, or the one thing is that maybe,
05:58are you hitting the sweetest spot on the utilization? And therefore, would that
06:03need to change a little bit? Would you need to do more hirings? How would that process shape up?
06:08Yeah. So, right now we are roughly in the range of 84% plus. It will be in a band of plus minus
06:132%. Now, obviously, we will have to hire as we go along, as we keep, you know, ramping up. But our
06:18hope is that as we are using more AI platform that we have, we did not necessarily have a linear
06:24increase in headcount with respect to our revenue increase. So, from that perspective, we are trying
06:29to use the latest technologies that we are evangelizing to our customers to be operationally
06:34efficient, whether it's our own operation, whether it's our service delivery to our customers.
06:38And that's where, you know, we believe there is scope while we keep the utilization where it is
06:43to have better margins as we go along, as we use more technology for service delivery.
06:48Well, the last question, TCE was very solid. I believe in the commentary you mentioned that Q3
06:56will actually see substantial deal flow as well. Can you talk a bit about the landscape and the
07:04nature of the deal wins now and anticipated? So, if you look at our historical, you know,
07:10financials, we have been declaring all our wins or all our, you know, bookings,
07:14whether it is renewals versus new. October, November, December, given the fact that 80%
07:19of our revenues are US-based, October, November, December is the final quarter
07:22for the year for many companies. That's where a majority of our renewals happen.
07:26What I had said on the earnings call is we will see a bulk of our renewals happen in this quarter
07:31that will take the ACB up. Even if we were to do the same, you know, amount in new wins,
07:36as we did in the earlier quarters, an average of that, our overall ACB bookings will be higher
07:40given the nature of the seasonality of the booking quarter. And overall, the pipeline is
07:45healthy. That's all I would like to say, because, you know, otherwise I'll be giving forward-looking
07:48statements, which we don't. But 14% QOQ growth and ramp up anticipated there too, I presume.
07:54Sandeep, just before we wrap up, anything that has happened, which is of note, and I haven't
08:00managed to figure that out and ask you. If there is something else that stood out for you in the
08:03quarter, please do tell us. Yeah, so see, from various perspectives, if you look at it, our
08:09industry is at a very interesting cusp. On one side, people keep talking about the macro economic
08:13environment, the US elections. There's a much bigger pivot that is happening on the technology
08:18side. And that is basically the AI slash Gen AI. And I would rather say the AI pivot at the Uber
08:24level. And we have been investing in that significantly more so in the last six quarters.
08:29That is helping us very well. We are seeing good traction based on our AI for tech platform called
08:34SASWA, and our AI for business, you know, platforms like IOR, Gen AI Hub, and so on.
08:40That, in my mind, for persistent will be the growth story, very differentiated from the sector.
08:44And that should give us sustainable growth going ahead. So that's the only other thing that I'll
08:48add to the commentary. Okay, well, that's the management of persistent systems telling us
08:52about how the quarter has gone by and what we can expect going forward.