ICICI Securities has maintained a ‘Hold’ rating on Persistent Systems with a price target of ₹5,670. While the company recorded a 7.8% sequential revenue growth, fueled by the Hitech and BFSI sectors, profit margins faced pressure due to rising wage costs. Investors are now tracking how the company manages client-specific headwinds in Europe and delays in closing new deals.
Persistent Systems recently reported a 7.8% quarter-on-quarter revenue increase in constant currency terms, highlighting resilience in key areas like Hitech and Banking, Financial Services, and Insurance (BFSI). Despite this growth, brokerage firm ICICI Securities has maintained a ‘Hold’ rating on the stock, setting a price target of ₹5,670. This target reflects a valuation based on projected earnings through mid-2029.
While the revenue numbers showed strength, the company’s internal performance varied by segment and geography. The Healthcare and Lifesciences division remained flat for the second consecutive quarter, indicating a lack of growth in that specific area. Furthermore, the company experienced a 10% drop in revenue from the European market, which the company attributed to issues faced by specific clients in the region.
Operating margins were a point of interest, coming in at 15%. This figure indicates pressure on profitability as the company navigates increased expenses, specifically from annual wage hikes and higher costs for third-party software licenses required for executing large projects. For investors, the ability to maintain or expand these margins while scaling revenue remains a critical area to monitor.
Regarding future business, Persistent Systems reported a Total Contract Value (TCV) of $600 million for the quarter. This is consistent with its typical quarterly average, excluding the large one-time deal recorded in the first quarter. However, analysts noted that some contract closures shifted into the following quarter because of a slowdown in client decision-making during the final weeks of September. This hesitation in finalizing deals is a trend currently observed across parts of the IT services sector, where clients often remain cautious about discretionary spending due to global economic uncertainty.
Investors may track several factors moving forward. These include the company’s success in resolving client-specific challenges in Europe, the potential recovery of the Healthcare segment, and the overall pace of new order closures. Additionally, managing the balance between revenue growth and the rising costs of talent and software will be essential for protecting profitability in the upcoming quarters.