Companies

Persistent Systems eyeing acquisitions in Europe

Abhishek Law Kolkata | Updated on June 22, 2021

Co looks at “slight derisking” of the primarily USA-reliant top-line

Mid-tier IT company, Persistent Systems is eyeing acquisitions in Europe as it looks at “slight derisking” of the primarily USA-reliant top-line.

While rebound in US and opening up in European economies are being witnessed post pandemic-induced disruptions; the company expects recoveries in India over the next few months following increased vaccination drive.

According to Sandeep Kalra, Executive Director and Chief Executive Officer, Persistent Systems, plans are afoot to be a $1 billion company over the next three to four years; with acquisitions in Europe being a cornerstone of that strategy. The idea is to have a geography-wise revenue mix with nearly 15-18 per cent of the topline coming from Europe, 10-12-odd per cent from India and Australia and the remaining from USA.

The current geography-wise revenue mix stands at 80 per cent from the USA, and 10 per cent each from Europe and Rest of the World (India and Australia). Persistent Systems reported a revenue of $ 566 million for FY21; a near 13 per cent Y-o-Y growth.

Acquisitions

Acquisitions could be explored in its prime verticals – the BFSI (banking, financial services and industry), healthcare and lifesciences, and microservices – or in the “service lines” that include digital services, cloud, data and security or acquisitions of company that have a “mix of both”.

With a cash surplus of $ 268 million, improving quarterly cash flows, reduced daily sales outstanding of 55 days (against an industry average of 65-70 days); the company has already initiated discussions.

Also read: Persistent Systems and IBM expand collaboration to accelerate Hybrid Cloud adoption for enterprise

“We are talking with multiple companies for acquisitions in Europe. These could be banker-led talks or direct ones. For us, cash is not an issue. We are debt-free. Quarterly cash flows have improved too. If required we can be quite proactive on the fund raising part too. The inorganic growth, apart from slight reduction in US dependence, will also be a conscious step towards the $1billion revenue target over the next three to four year period,” Kalra told BusinessLine.

Post-pandemic new normal

According to him, US markets are opening up and with high vaccinations, the rebound in the economy is visible. Deals are being renewed and digitization is one of the major growth drivers; apart from cloud and security. Similarly, Europe is following suit with some pockets opening-up.

In Q4FY21 (Jan – March), the company had an order book to the tune of $246.5 million, and it is now eyeing a presence in deals or orders between $ 5 million and $50 million.

“Three quarters back we did not announce any order book as we were not very sure of revenues flows. At that point, the US and Europe were badly hit, India was in a much better shape. Now, there are places in the US, where you see vaccinated people go out without masks. Europe obviously will be the next to follow. India, which is still reeling from the second wave, will see rebound a little later. There is no loss of productivity here for us and vaccinations are happening now. With stabilisation in the coming months, India too will rebound,” Kalra said.

According to him, there could be some pressure on margins as attritions costs could move up (in a bid to retain talent) while some expenses like travel costs are expected to increase post opening up in key-markets.

Published on June 22, 2021

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