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• Annual Report 2018-19
Shaping the future of software driven business
Message from the CFO
Dear Shareholders,
The year 2018-19 turned out to be a challenging year for the Company in terms of growth. Revenue registered growth of 2.2%
in USD terms and 11% in INR terms. One important aspect was that there were a good number of deal wins which were very
relevant in new technology areas which is your Company’s strength. This is a positive indication of our offerings and solutions
being found as value-adding by our customers. What could have been better is, we needed higher number of such deals.
The above is one aspect of the quality of revenue. The other aspect is to be able to service the customers with a wider range
of Persistent’s offerings and improve the revenue per customer. This is a metric on which we are placing higher emphasis.
To enable this, the sales teams have been suitably incentivized so that they collaborate with each other and with the delivery
teams towards this objective. As you know, we have a new leadership team in place which is bringing in fresh thoughts and
energy to propel growth.
On the operational front, the increase in demand for new technology skills is causing shortage of niche skills in the market.
This demand-supply gap is increasing the cost of operations. To offset this, we have continued to maintain intense focus on
driving cost efficiency. This could be seen in the improved utilization for the year at 81.1% from 79.2% for the previous year.
The blended billing rate improved by 3.3%. We continued our efforts to increase the offshoring of customer engagements
which has a favourable impact on margins. These improved operating efficiencies are reflected in higher operating margins.
EBITDA worked out to 17.2% for FY 2018-19 as compared to 15.5% in FY 2017-18.
EBITDA margin was impacted due to the provision of
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183 Million made towards impairment of deposits with the IL&FS
Group, wherein the Company had invested
`
430 Million in form of inter corporate deposits. These investments were made
on the basis of highest credit rating by credit rating agencies. However, post the significant downgrade of credit rating in
September 2018, there has been liquidity crisis at IL&FS Group. Your Company continues to monitor developments in this
matter and is committed to take steps including legal action that may be necessary to ensure full recovery of the said deposits.
Cash generation from business operations continued to be strong at
`
4,323 Million as compared to
`
4,212 Million in the
previous year. Days’ Sales Outstanding (DSO) stood at 63 days at the end of FY 2018-19 as compared to 66 days at the end
of FY 2017-18, reflecting better debtors’ turnaround. Cash and cash equivalents stood at
`
14,798 Million as compared to
`
12,002 Million at the end of FY 2017-18. There was high volatility in currency markets on the back of crude oil prices
and interest rate movement in the US. This led to significant INR depreciation with USD/INR touching a high of
`
74.42 in
October 2018. This sharp depreciation in INR resulted in foreign exchange loss on hedges that were taken in the previous year
and which matured during Q2 and Q3 of FY 2018-19.
Profit After Tax (PAT) amounted to
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3,516.79 Million in FY 2018-19 as compared to
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3,230.88 Million in FY 2017-18 with an
increase of 8.8%.
Your Company continues its commitment towards giving back to the society and contributed
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80.64 Million towards
CSR activities which are carried out under the banner of Persistent Foundation, which just completed 10 years of its journey.
Our dividend payout including the proposed dividend of
`
3 per share will be
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11 per share as compared to
`
10 per share in the
earlier year. The dividend payout ratio works out to 29.5% for FY 2018-19 as compared to 28.5% in FY 2017-18.
As you are aware, your Company launched its first share buyback program through an open market route for a total value
of
`
2,250 Million. The buyback commenced on February 8, 2019. Till May 31, 2019, approx. 85% of the buyback size has
been completed and the balance is propose to be completed over the next few weeks. The Annual Investor Day was held on
December 11, 2018 in Mumbai where we showcased some of our offerings and solutions including some interaction with your
Company’s customers. We thank all our investors for taking time out for participating in this event.
Priorities for 2019-20
We will continue our efforts to optimize costs, focus on improving productivity per sales person and revenue per customer. We
will continue to drive sustained free cash flow generation. The recent changes in senior leadership will help in better addressing
the market opportunities and accelerating the growth. Overall, we remain committed to deliver value to our customers and
enhance shareholders’ value. I take this opportunity to thank the outstanding team in our Finance and Secretarial functions,
and we will strive to continue doing our best.
I am indeed grateful to all our investors for their continued support.
Sincerely,
Sunil Sapre
Executive Director and Chief Financial Officer