Persistent Systems Ltd. shares slipped in early trade on Monday after the company reported a decline in June-quarter profit, with margins missing Street estimates despite steady revenue growth.
The stock fell as much as 3.86% to an intraday low of Rs 5,335.25 on the BSE. At 9:36 am, the shares were trading 3.25% lower at Rs 5,369.50. By comparison, the BSE Sensex was up 0.67% at 78,620.
Q1 Earnings Miss On Margins
Persistent Systems reported a consolidated net profit of Rs 483 crore, down 8.7% sequentially from Rs 529 crore, missing analyst estimates that had pencilled in growth. Revenue rose 6.1% quarter-on-quarter to Rs 4,303 crore, broadly in line with expectations.
ALSO READ: Persistent Systems Q1 Results: Profit Slips 9% Even As Revenue Rises; Margin Narrows
Operating performance, however, disappointed. EBIT declined 11.8% to Rs 582 crore, while the EBIT margin contracted to 13.5% from 16.3% in the previous quarter, well below estimates of 16.49%. Including forex gains and losses, the reported EBIT margin stood at 16.1%.
Forex Losses Weigh On Profitability
The decline in profit was largely driven by foreign exchange losses and a sharp rise in operating expenses. The company reported a forex loss of Rs 105.2 crore during the quarter, compared with a forex gain of Rs 1.1 crore in the March quarter. Other expenses also increased 40% sequentially.
Despite the margin pressure, Persistent delivered constant currency revenue growth of 4.1%, ahead of expectations and an improvement from 3.4% in the previous quarter. The company also recorded its 25th consecutive quarter of sequential revenue growth and reported its highest-ever quarterly total contract value (TCV) of $1.15 billion, compared with $600.8 million in the preceding quarter.
Key Business Highlights
Growth was broad-based across verticals, with the software business leading the way with 9.7% growth.
During the quarter, Persistent signed a strategic deal worth more than $650 million with a global technology leader.
The company added 1,138 employees during the quarter, while attrition moderated to 12.3% from 13% in the previous quarter.
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