Persisent Systems
BSE SENSEX
24,486
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,436
PSYS IN
80.0
48.6 / 0.7
944 / 575
-1/1/-17
108
61.5
25 January 2016
3QFY16 Results Update | Sector: Technology
CMP: INR608
TP: INR700(+15%)
Neutral
Marginal beat despite ISV decline
IP-led revenue drives beat; Enterprise traction strong:
Second consecutive
quarter of mid-teens sequential growth in Enterprise revenue helped PSYS
drive 8% QoQ growth in 3QFY16 to USD90m; 4% QoQ organic compared with
our organic growth estimate of 3%. The increase was led by organic growth of
12% QoQ in IP-led revenue v/s our estimate of 1.5%. Despite sluggish ISV, PSYS
has delivered 3-5%+ QoQ organic growth in overall revenue in three out of the
last six quarters.
Revenue-led profitability beat:
EBITDA margin expanded by 10bp to 18.8%,
80bp beat to our estimate, led by higher IP revenue this offset the negative
impact of Aepona amalgamation, lower utilization and higher onsite
proportion. Consequently, PAT grew 7.8% QoQ to INR775m v/s INR682m
estimate.
Sanguine near-term visibility:
With seasonally strong 4Q for IP-led revenue
and deals-led momentum in the Enterprise segment, we see the financial
performance sustaining in the next quarter too. Our earnings estimates for
FY17/18 are up 1.3%/2.3% factoring the strong exit.
Volatility keeps rerating in check:
PSYS is shifting its focus and energies to
growth segments like Platform and EDT, and taking big bets on the same. The
combination of drag in 70% of the business (IP + ISV) and strong traction in the
remaining ~30% has meant volatile revenue growth performance at PSYS. Also,
strong Enterprise growth has come at the cost of margins (down ~2pp in
9MFY16). At 16x FY16E and 14x FY17E P/E, valuation upside at PSYS would be a
function of consistent revenue growth at a stable EBITDA margin. Our current
target multiple of 14x factors the inherent volatility in the business and lack of
pick-up in bulk of revenues (ISVs). Maintain
Neutral.
Financials & Valuation (INR b)
Y/E Mar
2015 2016E 2017E
Net Sales
18.9
22.5
27.3
EBITDA
3.9
4.3
5.3
PAT
2.9
3.0
3.5
EPS (INR)
36.3
37.6
43.3
Gr. (%)
16.6
3.6
15.1
BV/Sh (INR)
180.9 205.6 235.3
RoE (%)
22.1
20.0
20.2
RoCE (%)
24.4
19.6
19.5
P/E (x)
16.7
16.2
14.0
P/BV (x)
3.4
3.0
2.6
Estimate change
TP change
Rating change
Quarterly Performance (Consolidated)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Sagar Lele
(Sagar.Lele@MotilalOswal.com); +91 22 3982 5585

Persisent Systems
3QFY16: Organic revenue growth sees uptick
PSYS’ 3QFY16 revenues grew 8.1% QoQ to USD89.7m (estimate of 6%). The
revenue growth included ~USD3m from the consolidation of recently acquired
Aepona. Excluding this, revenue growth would ~4% QoQ. In the previous
quarter, the management had guided for 10-12% revenue growth for FY16
(including Aepona). With strong revenue growth reported in 3Q, it would
achieve the lower end of the guidance even with no QoQ growth in 4Q.
Exhibit 1: Revenue growth strong because of pick-up in linear business, and addition of
Aepona
8.6
Revenue (USD m)
5.0
0.0
68
70
73
73
76
80
Revenue Growth QoQ (%)
8.1
3.9
4.2
79
0.6
80
83
90
-1.8
5.5
1.5
2.2
63
Source: Company, MOSL
Volumes in the linear business grew 1.9% QoQ, with onsite volumes increasing
by 12.1% and offshore volumes increasing 0.3% QoQ.
Onsite billing rates are 3.5x that at offshore for PSYS. Onsite pricing was down
2.4% QoQ at USD14,717 per person month (PPM) while offshore pricing was
down 0.8% QoQ to USD4,217 PPM.
In Rupee terms, revenue was INR5.9b, +9.1% QoQ, compared to our estimate of
INR5.8b. Average realized currency rate during the quarter was INR66.04, v/s
our estimate of INR65.89.
Exhibit 2: IP-led revenues saw pick-up even excluding the addition of Aepona
37.4
IP business revenue (USD m)
QoQ growth (%)
34.1
14.4
-12.4
9.5
13.1
-4.8
12.4
14.2
2.1
2.9
14.5
15.0
1.0
15.1
-4.1
14.5
-0.1
14.5
-7.1
13.4
18.0
Source: Company, MOSL
EBITDA margin was 18.8%, +10bp QoQ, v/s estimate of 18%. Gross margin fell by
10bp to 38.8% and SGA was down 10bp QoQ to 20.1%.
25 January 2016
2

Persisent Systems
Exhibit 3: EBITDA margin higher than expected led by higher IP revenue
EBITDA Margin (%)
S&M (%)
9.9
10.2
9.9
9.7
8.9
8.8
8.1
8.9
7.6
27.0
21.8
9.0
9.4
21.7
26.0
27.7
20.6
20.1
20.2
19.4
18.7
18.8
Source: Company, MOSL
Margins during the quarter were impacted by one-time costs associated with
the acquisition and integration of Aepona. This negative impacted margins by
50bp.
Moreover, the quarter also witnessed a dip in utilization as freshers added in
the previous quarter became billable in 3Q.
The negative impact of both these factors was offset by higher IP revenue and
recoveries in receivables leading to lower provisioning for doubtful debts.
Exhibit 4: Utilisation impacted by fresher addition
Offshore Utilization %
70.3
71.8
67.7
65.9
68.4
72.9
73.2
74.6
71.6
72.8
68.8
Source: Company, MOSL
Forex gains during the quarter were INR42m v/s our estimate of INR27m, which
drove other income to INR160m, above our estimate of INR129m.
Effective tax rate during the quarter was 25.5%, in line with our estimate. PAT at
INR775m was above our estimate of INR682m on account of the all-round beat
during the quarter.
Revenue growth in ISVs declined by 3.1% QoQ. ISVs continue to be under
pressure with a four-quarter CQGR of 0%, despite addition to revenue growth by
the acquisition of RGEN in 2Q. Enterprise however has seen continued traction
for two consecutive quarters. After a sluggish 1Q, Enterprise grew by 14.1% QoQ
in 2Q, and 16.2% QoQ in 3Q. IP revenues grew by 34.1% QoQ, largely because of
the integration of Aepona, which contributed to ~USD2.5m in revenue.
Excluding this, IP revenue grew by ~15.5% QoQ post three consecutive quarters
of decline.
Segment-wise performance: Weakness in ISV and strength in Enterprise
25 January 2016
3

Persisent Systems
Exhibit 5: Enterprise continued to show strong growth
Industry Classification
ISV
Enterprise
IP Led
Contri. to
Rev. (%)
51.3
28.6
20.1
Growth -
QoQ (%)
-3.1
16.2
34.1
4 Qtr
CQGR (%)
0.0
8.7
4.5
Source: Company, MOSL
Growth during the quarter was driven by North America (6.9% QoQ) and RoW
(29.7% QoQ), while Europe remained flat. RoW (mainly India and APAC) has
been a volatile segment for PSYS over the last few quarters.
Contri. to
Rev. (%)
85.3
6.3
8.4
Growth –
QoQ (%)
6.9
0.1
29.7
4 Qtr
CQGR (%)
3.2
0.0
3.7
Exhibit 6: RoW remains volatile
Geographies
North America
Europe
RoW
Source: MOSL, Company
Top client grew for the third consecutive quarter, after four successive quarters
of decline, and was a key positive during the quarter. 2-5 clients grew by 2.6%
QoQ and 6-10 grew 13.9% QoQ. Smaller accounts too showed strong growth, as
the non-top 10 accounts grew by 9.2% QoQ.
Contri. to
Rev. (%)
17.4
16.9
9.8
Growth -
QoQ (%)
6.8
2.6
13.9
4 Qtr
CQGR (%)
2.9
2.1
4.7
Exhibit 7: Top client returned to growth – a key positive during the quarter
Client Metrics
Top Client
Top 2-5 Clients (%)
Top 6-10 Clients (%)
Source: MOSL, Company
Takeaways from management commentary
Adjustments needed in the ISV portfolio:
Business from ISVs has been under
pressure on account of reduced requirement of effort. During the quarter, the
additional factor in play was that the product development work associated
with Aepona was shifted from Intel to within Persistent. Going ahead, PSYS sees
two opportunities for growth in ISVs, by targeting: [1] New customers, [2] New
spend in existing customers. Some adjustments would have to be made to the
current ISV portfolio with respect to these opportunities in order to see
increased momentum.
IP – not only aimed at end-of-life products:
PSYS has traditionally aimed at
acquiring products that are mature and at the end of the lifecycle. However,
recent acquisitions have been of products that are relevant to market conditions
and earlier in the maturity curve.
Deal sizes in Digital getting bigger:
Deal sizes in Digital have consistently grown
larger. While earlier, deal size averaged in a few hundred thousand dollars, the
company is seeing discussions for deals in the range of USD2-3m. The increase in
size is largely a function of more deals in integration and maintenance.
Won’t shy away from investing for growth:
PSYS has been seeing margin
pressure directly proportional to its growth and aspiration in the EDT business.
4
25 January 2016

Persisent Systems
The company feels the need to continue investing in Sales & Marketing, thought
leadership, and recruitment of talent. The opportunity in the next few quarters
is bright and PSYS won’t hesitate in investing to capture long term growth.
Hiring plans on track:
PSYS is on-track in its recruitment plan of 1,000 net
additions in FY16. 4Q should see hiring that achieves the annual target. A large
chunk of the addition is expected to be comprised of freshers.
FY17 outlook:
PSYS sees a continual in the traction it has been seeing in EDT. Its
focus on Data, APIs and experiences has been creating good traction. Moreover,
it has been seeing a shift in positioning with clients – from deployment to
partnering in product development.
Change in estimates
The Citrix acquisition is expected to close in another 45 days, and should
accordingly contribute to incremental revenue in 4QFY16 and 1QFY17. We have
hence raised our revenue estimates to account for this acquisition. We expect
USD revenue growth of 11.8/18.2/14.5 for FY16/17/18E respectively.
While our view on margins remains intact, there has been little change to our
estimates to account for one-time costs associated with acquisitions, higher
margin in Citrix, and the beat in 3Q caused by higher IP revenues.
Exhibit 8: Change in estimates
FY16E
65.3
345.0
11.8
19.3
37.6
Revised
FY17E
67.0
407.9
18.2
19.4
43.3
FY18E
69.0
467.0
14.5
19.4
51.7
FY16E
65.3
341.1
10.6
19.1
36.0
Earlier
FY17E
67.0
401.8
17.8
19.5
42.7
FY18E
69.0
464.6
15.6
19.2
50.6
FY16E
0.1%
1.1%
120bp
20bp
Change
FY17E
0.0%
1.5%
50bp
-10bp
1.3%
FY18E
0.0%
0.5%
-110bp
20bp
2.3%
NR/USD
SD Revenue - m
SD revenue gr. (%)
BITDA Margin (%)
PS - INR
Source: MOSL, Company
Valuation and view: Remain positive on business; Neutral on valuations
In Tier-II IT, we prefer PSYS’ business fundamentals, given the following factors:
One of the few Tier-II companies with the potential to grow revenues above
the industry given the focus on Enterprise Digital Transformation.
Unlikelihood of obsolescence in its chosen segments over the medium to
long term; and multi-year relationships, with marquee clientele in the ISV
space.
Credible experience in agile product development and iterative approach to
Product Engineering – two very relevant trends in today’s market
Healthy profitability, with EBITDA margin in the top quartile of the industry
However, increasing growth pressure on large ISVs some of which are counted
by PSYS among its top customers poses a risk to growth in the near term. We
expect PSYS to post revenue and EPS CAGR of 17% over FY16E-18E. The stock
trades at 16.2x FY16E EPS and 14.0x FY17E EPS.
Our current estimates model 3.6% CQGR over the next four quarters (aided by
integration of RGen and Aepona) to meet revenue growth estimate of 18.2% for
FY17E and 14.5% for FY18E. Given the small sizes of projects and shorter
duration of work, one could continue to witness volatility in the revenue growth
25 January 2016
5

Persisent Systems
performance. Our one year forward target price of INR700 discounts forward
EPS by 14x, which implies 15% upside.
Based on the business model, financial performance and execution thus far,
PSYS’s premium valuation to peers is justified, in our view. Two factors that will
be imperative to revisiting our rating are the turnaround in ISV and
consequently overall organic growth, and ascertaining the impact from four
recent acquisitive transactions. We currently maintain our
Neutral
rating on the
stock. However, PSYS along with MTCL are our preferred business models in this
space from a long term perspective.
Key triggers
Uptick in margins on IP-led revenues
Further growth acceleration in linear business
Stability in large ISV accounts
Key risk factors
Continued revenue sluggishness in ISV segment
Pressure on margins from higher S&M to sell products
Decline in discretionary activity
Exhibit 10: 1-year forward PB band
Avg(x)
Min(x)
25.1
5.0
4.0
PB (x)
Peak(x)
Avg(x)
4.5
Min(x)
Exhibit 9: 1-year forward PE band
30
25
20
15
10
5
12.4
6.7
15.1
PE (x)
Peak(x)
3.0
2.0
1.0
2.3
1.2
2.8
Source: Company, MOSL
Source: Company, MOSL
Exhibit 11: Comparative valuation
Company
Mphasis
Mindtree
KPIT Tech
Hexaware
NIIT Tech
Persistent Sys.
Mkt cap
(USD b)
1.7
1.8
0.4
1.0
0.5
0.7
Rating
Neutral
Neutral
Neutral
Neutral
Neutral
TP
(INR)
520
1600
165
250
610
Upside
EPS (INR)
P/E (x)
RoE (%)
FY16-18E CAGR (%)
(%)
FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E USD rev.
EPS
-4.9
35.5
40.8
45.3
15.4
13.4
12.1 13.2 14.3 14.8
8.4
12.9
8.9
73.0
89.2 110.4
20.1
16.5
13.3 27.8 28.3 28.6
17.7
23.0
12.2
13.6
14.9
17.3
10.8
9.9
8.5 18.8 17.1 16.7
6.6
12.8
14.7
13.3
15.5
16.2
16.4
14.1
13.4 29.3 31.0 30.3
14.7
10.5
19.1
33.2
35.5
38.2
15.4
14.4
13.4 18.9 18.5 18.0
7.8
7.3
14.9
37.6
43.3
51.7
16.2
14.1
11.8
20.0
20.2
22.0
16.4
17.3
Source: Company, MOSL
Neutral 700
25 January 2016
6

Persisent Systems
Story in charts
Exhibit 1: Aggressive foray in IP-led revenues...
IP led revenues (USD m)
123.8
Growth (%)
Exhibit 2: … and strong traction in Enterprise business…
Enterprise revenues (USD m)
17.4
14.1
QoQ (%)
16.2
61.1
22.8
9.2
FY10
14.9
FY11
18.3
FY12
40.9
FY13
20.5
49.3
FY14
19.9
59.1
FY15
14.4
16.9
8.9
5.0
18.4
19.3
19.3
0.3
22.1
25.6
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: …have offset sluggish ISV business (~51% of rev)
ISV Revenues (%)
60.3
Exhibit 4: Access to market is key to scale – beefed up front-
end hiring in recent quarters
Sales personnel
224 216
208 203
202 212 208
58.3
57.9
57.8
57.0
57.2
51.3
139 150
119 128
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: Turnaround in linear revenues is key to 20%+
growth…
Revenue (USD m)
34.2
21.8
14.7
170.2
FY11
207.4
FY12
237.8
FY13
15.2
12.6
308.5
FY15
11.8
345.0
FY16E
407.9
FY17E
Growth (%)
Exhibit 6: …and continued IP traction is crucial to
profitability uptick
PAT (INR m)
25.9
23.4
25.8
EBITDA margin (%)
18.2
14.5
467.0
FY18E
20.4
20.7
19.3
19.4
19.4
274.1
FY14
1,397 1,431 1,876 2,493 2,906 3,010 3,462 4,138
FY11
FY12
FY13
FY14
FY15 FY16E FY17E FY18E
Source: Company, MOSL
Source: Company, MOSL
25 January 2016
7

Persisent Systems
Operating metrics
Exhibit 7: Operating metrics
2QFY14
Verticals (%)
Telecom & Wireless
Infrastructure & Systems
Life Sciences & Healthcare
Geography (%)
North America
Europe
RoW
Industry Classification (%)
ISV
Enterprise
IP Led
Revenue Mix (%)
Services: Onsite
Services: Offshore
IP Led
Client Metrics (%)
Top Client
Top 2-5 Clients
Top 6-10 Clients
Clients billed
Prod. Eng. & Platforms
IP Led
Customer Engagement Size
USD3m+
USD1-3m
Repeat Business
DSO
Employee Metrics
Technical People
Sales & BD
Others
Total
Billable Person Months
- Onsite
- Offshore
Linear Utilization %
Onsite Utilization %
Offshore Utilization %
Attrition (%)
IP Led Person Months
Yield (USD/p.p.m)
Billing Rates (USD/p.p.m)
Onsite
Offshore
17.6
69.2
13.2
84.6
4.4
11.0
3QFY14
18.0
68.9
13.2
83.1
6.0
10.9
4QFY14
15.3
71.6
13.1
85.4
6.1
8.5
1QFY15
18.5
68.4
13.1
85.9
6.5
7.6
60.3
19.8
20.0
20.6
60.3
19.1
22.5
15.2
9.5
243
388
16
32
82.2
62
20.5
61.7
17.8
19.8
17.1
10.3
253
380
16
34
82.7
63
21.4
59.0
19.6
21.1
18.3
9.1
261
358
15
36
85.2
63
23.1
56.9
20.0
20.8
17.9
10.3
260
347
14
38
86.7
69
2QFY15
16.7
69.9
13.4
86.1
6.3
7.7
58.3
22.1
19.6
24.5
55.9
19.6
19.0
17.1
8.9
281
376
14
41
83.6
65
3QFY15
16.0
70.4
13.6
84.7
7.1
8.2
57.9
23.1
19.0
25.1
55.9
19.0
17.5
17.5
9.2
273
349
14
41
84.1
65
4QFY15
16.3
69.4
14.3
85.4
6.8
7.8
57.8
24.1
18.1
26.2
55.7
18.1
16.5
17.6
9.1
268
326
14
48
85.6
64
1QFY16
14.9
70.8
14.3
84.4
6.3
9.3
57.0
24.6
18.4
26.8
54.8
18.4
18.1
17.9
9.6
277
310
15
52
88.7
67
2QFY16
13.2
72.4
14.4
86.2
6.8
7.0
57.2
26.6
16.2
29.5
54.3
16.2
17.6
17.8
9.3
311
299
17
46
86.2
68
3QFY16
16.2
70.1
13.7
85.3
6.3
8.4
51.3
28.6
8.4
29.8
50.1
20.1
17.4
16.9
9.8
337
291
19
44
82.0
69
6,982
128
347
7,457
15,258
1,106
14,152
71.7
89.4
70.3
14.0
2,210
3,919
7,109
139
354
7,602
15,517
1,152
14,365
72.9
85.9
71.8
13.2
2,260
3,934
7,349
150
358
7,857
16,155
1,246
14,909
69.2
86.9
67.7
13.4
2,343
3,927
7,271
202
403
7,876
16,139
1,283
14,856
67.7
88.0
65.9
14.0
2,419
3,915
7,447
212
408
8,067
16,015
1,403
14,612
70.3
89.7
68.4
14.1
2,496
4,123
7,664
208
424
8,296
16,031
1,518
14,513
74.3
88.6
72.9
14.7
2,620
4,264
7,861
224
421
8,506
16,063
1,551
14,512
74.7
89.2
73.2
15.5
2,672
4,272
7,810
216
428
8,454
16,138
1,623
14,515
72.9
84.7
71.6
16.4
2,880
4,134
7,905
208
432
8,545
16,066
1,854
14,212
76.1
87.4
74.6
17.1
3,021
4,346
8,334
203
429
8,966
16,718
2,097
14,621
74.5
86.6
72.8
17.1
3,526
4,428
14,277
4,146
14,510
4,179
14,355
4,241
14,905
4,219
14,864
4,271
14,862
4,201
15,159
4,199
15,321
4,146
15,075
4,251
14,717
4,217
Source: MOSL, Company
25 January 2016
8

Persisent Systems
Financials and Valuation
Key assumption
Y/E March
INR/USD Rate
Revenues (USD m)
Services Revenue (USD m)
IP Led Revenues (USD m)
Total Headcount
Net Addition
Per Capita Ptoductivity (USD)
Linear Utilization (Blended %)
2011
45.6
170.2
155.4
14.9
6,360
1,698
26,766
71.0
2012
48.2
207.4
189.1
18.3
6,628
268
31,290
72.1
2013
54.4
237.8
196.9
40.9
6,970
342
34,121
74.1
2014
60.9
274.1
224.8
49.3
7,857
887
34,881
70.9
2015
61.3
308.5
249.4
59.1
8,506
649
36,272
71.7
2016E
65.3
345.0
278.9
66.0
9,177
671
37,589
74.5
2017E
67.0
407.9
322.0
85.9
10,171
994
40,100
74.8
2018E
69.0
467.0
372.2
94.8
11,415
1,244
40,913
74.7
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2011
7,758
29.1
1,583
20.4
424
1,159
0
344
0
1,504
108
7.2
0
1,396
1,396
21.3
2011
435
7,036
7,471
0
-60
7,441
4,543
2,281
2,261
605
2,500
3,677
0
1,582
1,000
1,095
1,602
1,206
396
2,075
7,441
2012
10,003
28.9
2,337
23.4
611
1,726
0
256
0
1,981
551
27.8
0
1,431
1,431
2.5
2012
400
8,005
8,405
7
-107
8,376
6,090
2,892
3,197
528
123
6,189
0
2,033
3,290
866
1,660
879
781
4,528
8,376
2013
12,945
29.4
3,352
25.9
783
2,569
0
61
0
2,630
754
28.7
0
1,876
1,876
31.2
2013
400
9,783
10,183
14
-190
10,646
6,951
3,449
3,502
1,174
173
7,690
0
2,509
3,677
1,503
1,893
845
1,048
5,797
10,646
2014
16,692
28.9
4,303
25.8
1,026
3,277
0
150
0
3,427
934
27.3
0
2,493
2,493
32.9
2014
400
11,823
12,223
32
-260
12,389
8,545
4,468
4,077
307
823
9,966
0
3,028
5,028
1,910
2,785
1,574
1,211
7,181
12,389
2015
18,913
13.3
3,906
20.7
939
2,967
0
932
0
3,900
993
25.5
0
2,906
2,906
16.6
2015
800
13,255
14,055
25
-315
13,885
9,408
5,331
4,076
40
2,116
11,201
0
3,586
6,036
1,579
3,549
1,793
1,755
7,653
13,885
2016E
22,543
19.2
4,341
19.3
968
3,373
0
689
0
4,062
1,052
25.9
0
3,010
3,010
3.6
2016E
800
15,173
15,973
26
-442
15,678
11,186
6,300
4,886
92
2,352
11,317
0
4,257
4,571
2,489
2,969
1,619
1,350
8,347
15,678
2017E
27,327
21.2
5,288
19.4
1,094
4,194
0
454
0
4,647
1,185
25.5
0
3,462
3,462
15.0
2017E
800
17,480
18,280
26
-442
17,985
12,386
7,372
5,014
92
2,352
13,795
0
5,160
6,007
2,628
3,268
1,963
1,305
10,526
17,985
(INR Million)
2018E
32,225
17.9
6,265
19.4
1,116
5,150
0
404
0
5,554
1,416
25.5
0
4,138
4,138
19.5
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
(INR Million)
2018E
800
18,535
19,335
26
-442
19,040
12,686
7,653
5,033
92
2,352
14,901
0
5,375
6,866
2,661
3,339
2,044
1,294
11,562
19,040
25 January 2016
9

Persisent Systems
Financials and valuation
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Net Debt/Equity (x)
2011
17.1
22.2
96.2
2.8
16.1
0.0
0.0
0.0
0.0
0.0
0.0
20.1
16.2
3.8
75
0
0
0.0
2011
1,583
-81
-460
-108
0
935
-971
-37
-939
0
-1,910
19
0
0
90
109
-866
1,866
1,000
2012
17.7
25.5
108.2
3.0
16.9
34.3
23.8
5.6
4.4
18.8
0.5
18.0
14.5
3.7
75
0
0
0.0
2012
2,337
-260
27
-551
0
1,553
-1,470
83
2,378
0
908
38
7
0
-19
25
2,486
804
3,290
2013
23.5
33.2
131.1
4.5
19.2
25.9
18.3
4.6
3.4
12.9
0.7
20.2
17.9
3.9
75
0
0
0.0
2013
3,352
181
260
-754
0
3,038
-1,735
1,304
-50
0
-1,785
128
8
0
-346
-211
1,043
2,634
3,677
2014
31.2
44.0
157.3
6.0
19.3
19.5
13.8
3.9
2.5
9.6
1.0
22.3
21.9
4.4
75
0
0
0.0
2014
4,303
0
-403
-934
0
2,965
-734
2,232
-650
0
-1,384
96
18
0
-398
-284
1,297
3,731
5,028
2015
36.3
48.1
180.9
10.0
27.5
16.7
12.7
3.4
2.1
10.0
1.6
22.1
24.4
4.6
75
0
0
0.0
2015
3,906
0
-207
-993
0
2,705
-670
2,035
-1,292
0
-1,963
-118
-7
0
-24
-149
593
5,443
6,036
2016E
37.6
49.7
205.6
11.0
29.2
16.2
12.2
3.0
1.8
9.3
1.8
20.0
19.6
5.0
75
0
0
0.0
2016E
4,341
0
-1,378
-1,052
0
1,911
-1,831
80
-236
0
-2,067
-33
1
0
-370
-402
-558
5,129
4,571
2017E
43.3
56.9
235.3
12.0
27.7
14.0
10.7
2.6
1.4
7.4
2.0
20.2
19.5
5.5
75
0
0
0.0
2017E
5,288
0
-743
-1,185
0
3,359
-1,222
2,138
0
0
-1,222
0
0
0
-702
-702
1,436
4,571
6,007
2018E
51.7
65.7
248.9
12.0
23.2
11.8
9.3
2.4
1.2
6.1
2.0
22.0
22.1
6.4
75
0
0
0.0
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
2018E
6,265
0
-177
-1,416
0
4,672
-1,135
3,537
0
0
-1,135
-1,927
0
0
-751
-2,678
859
6,007
6,866
25 January 2016
10

Persisent Systems
Corporate profile
Company description
Persistent is a global company specializing in
software product and technology innovation,
partnering with pioneering start-ups, innovative
enterprises and the world’s largest technology
brands. The company staffs over 8,000 employees
and clocked revenues of USD274m (FY14). It has a
clear focus on new initiatives that are witnessing
greater demand and will drive the next wave of
growth in technology - Cloud, Mobility, Data
Analytics and Collaboration.
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Sep-15
38.5
11.8
16.6
33.1
Jun-15
38.5
11.0
20.4
30.1
Sep-14
39.0
10.0
27.7
23.4
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
Saif Advisors Mauritius Ltd A/c Saif India IV
FII Holdings Ltd
PSPL ESOP Management Trust
ICICI Prudential Value Discovery Fund
Nordea 1 Sicav Emerging Stars Equity Fund
HDFC Trustee Company Ltd A/c HDFC Mid
Capopportunities Fund
% Holding
5.3
5.2
3.0
2.7
2.4
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Anand Deshpande
Amit Atre
Designation
Chairman
&
Managing
Director
Company Secretary
Exhibit 5: Directors
Name
Anant Jhingran
Pradeep K Bhargava
Roshini Bakshi
Mritunjay Kumar Singh
Name
Kiran Umrootkar
Prakash Telang
S K Bhattacharyya
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells LLP
Joshi Apte & Co
Type
Statutory
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
37.1
43.4
51.7
Consensus
forecast
37.5
44.8
51.1
Variation (%)
-1.2
-3.1
1.1
Source: Bloomberg
Source: Capitaline
25 January 2016
11

Disclosures
This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its
affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does
Persisent
an offer, invitation or
not constitute
Systems
inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been furnished to
you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal recommendation or take into account the particular investment
objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek
professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for
future performance, future returns are not guaranteed and a loss of original capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a some
companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or its affiliates are
seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may educate investors
on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other parties for the purpose of gathering, applying and
interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business.
MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, MOSt
generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals or affiliates
may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment
decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing among other things, may give rise to real or potential conflicts of interest.
MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies
mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an
advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing
whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent
conflict of interest in some of the stocks mentioned in the research report
Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match
with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set of customers having various
objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of its affiliates or employees free and
harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is based on publicly available data or other sources
believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription
service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or summary of the securities, markets or developments referred to in the document. While we
would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt
and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in
this report. MOSt or any of its affiliates or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of
merchantability, fitness for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on this report or for
any necessary explanation of its contents.
Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any compensation for
products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.
Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.
Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities mentioned in this
report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412
There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or
indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation of MOSt research receive
compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Analyst Certification
Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee
PERSISTENT SYSTEMS
No
No
A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes
Regional Disclosures (outside India)
For U.S.
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which
would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a
registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the
absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This
document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be
engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by
the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal
Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore,
may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC)
pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with
Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any
investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.”
Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in
Hong Kong & are not conducting Research Analysis in Hong Kong.
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors Regulations and is a
subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to accredited investors, as defined in the
Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Kadambari Balachandran
Email : kadambari.balachandran@motilaloswal.com
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931
For Singapore
25 January 2016
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
12