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Pune-based technology services company Persistent Systems expects the BFSI and technology sectors to lead growth over the next three to four quarters. While the healthcare segment may experience some softness, it is still projected to maintain a positive growth trajectory. Sandeep Kalra, CEO of Persistent Systems said the healthcare vertical at Persistent spans across various sectors, including pharmaceuticals, scientific instruments, medical devices, and both payers and providers.
Some parts of this ecosystem rely on factors such as US government research funding, which can experience pauses due to USAID or changes related to the Doge program. This has led to some softness in demand, particularly with a couple of customers, resulting in a slight decline. However, looking at the pipeline and the customer base ahead, the company is optimistic about navigating through this period.
In the January-March 2025 quarter (Q4FY25), the company reported constant currency revenue growth of 4.5% , while the EBIT margin improved by 70 basis points to 15.6%.
Deal wins moderated during the quarter, totalling $517.1 million. This is the edited excerpt of the interview.
Q: Persistent Systems registered a strong quarter, but was there any impact on the business in terms of deals being paused, or did you see any deal closures getting delayed? What's the sense on the ground right now? A: At a high level, if you look at the quarter, we delivered $375.2 million. This is a 4.
2% quarter-on-quarter growth and 20.7% on a year-on-year basis. In full-year terms, it is $1.
409 billion, an 18.8% year-on-year growth. Now, coming to your question, the macro did get tougher, and the last six to eight weeks have been fairly challenging from a macro perspective, with all the discussions about Doge, USAID, tariffs, etc.
There are pockets where the impact is being felt—whether it is decision-making being delayed, some deal flow slowing, or people becoming a bit more cautious about spending. So yes, we saw some of that. But from a revenue perspective—and to a certain extent, from an order book perspective—we delivered very well.
It could have been better from an order book standpoint. But the macro is the same for everyone, and we hope that this stabilises and bodes well for the IT services industry. The last thing I want to point out is—even if the macro becomes tougher—I think our industry has strong value propositions.
Persistent, at large, if you look at the last five years as well, we have done well both in good macro and in tough macro. Q: Let us talk about healthcare. That revenue growth was soft, and that is about 28% of your overall revenues.
You mentioned the Doge, USAID. Was there any impact due to those particular factors? What led to the slower growth, and when should we expect a recovery in the healthcare vertical? A: If you look at our healthcare vertical, it spans from pharma to scientific instruments, medical devices, and payers and providers. Now, parts of this ecosystem are also dependent on things like US government funding for research.
When that gets paused due to USAID or the Doge part coming in and kind of optimising, there is some softness. We did see softness in one or two of our customers, and that led to a bit of de-growth. But overall, if I look at our pipeline, our customers, and what is ahead, I think we will sail through reasonably well.
Healthcare has done very well for us over the last six quarters. In the next three to four quarters, we believe banking, financial services, and tech will be the growth drivers. Healthcare may be a little soft, but it will still continue to grow for us.
Q: Will FY26 be better for Persistent Systems, especially given that the annual contract value last year was up 12%, and the top line also grew by 18–19%? Does that add to your conviction? A: I don’t want to give any forward-looking guidance. But to sum it up, we announced two things—an annual contract value and a total contract value. The total contract value includes contracts that span more than 12 months.
Revenue realisation from that is spread across multiple years. If I look at the revenue that Persistent delivers quarterly, it’s a sum of what converts from annual contract value and these multi-year deals. We are fairly happy with the backlog we are entering the year with.
You have seen our peers announce results. We have delivered relative outperformance over the last five years, quarter-on-quarter. This is our 20th quarter of sequential revenue growth.
We will let the macro pan out, but we are reasonably confident about continuing our growth journey. Q: Just trying to get a bit more clarity—will FY26 be as good or better than FY25? A: We don’t give forward-looking guidance. The year has started off well, and we will let it pan out.
There are two parts: on the revenue side, we are growing at a healthy pace compared to the industry. We delivered more than 4% sequential growth. Second, we didn’t just deliver revenue growth—we achieved 15.
6% EBIT compared to a full-year EBIT of 14.7%, and last year’s 14.4%.
So, we are entering the year with strong momentum on both revenue and margins. Net-net, we are confident of delivering another year of outperformance. But of course, we are all subject to macroeconomic risks.
If the macro worsens, growth may taper. But overall, we are confident of delivering good growth in the coming years. Q: Your margins improved by 70 basis points this quarter.
What led to this improvement? A: If you look at our margin performance—we have been saying that we invested ahead of the curve in sales and marketing. Our sales and marketing headcount has remained in a narrow band, even as we delivered over $225 million in incremental revenue this year. That gives us SG&A leverage.
On utilisation, we started the year at 81–82% and ended it at 88%. That’s a significant improvement. And please note—many companies are de-growing and reducing headcount, while we are among the few growing and hiring.
In this quarter alone, we added 600 plus team members globally. So whether it’s revenue growth driving overall cost leverage, sales and marketing efficiency, forex advantages, or utilisation gains—every part of the business is performing well. Q: Talking about your margin guidance—you have said you want to improve margins by 200 basis points from FY25 to FY27.
But in FY25, margins only improved by 30 basis points. That means the heavy lifting must happen in FY26 and FY27. How will you achieve that? A: The devil is in the details.
January-March 2025 quarter (Q4FY25) EBIT was 15.6%, while the full-year EBIT is 14.7%.
If we maintain the 15.6% level, that’s already a 90-basis point improvement over last year. Our endeavour would be to deliver better than that.
While we are not offering guidance, that’s our aspiration. If we do achieve that, we will have already delivered the first 100 basis points improvement over the year. Of course, all of this depends on macro factors—we face the same tariff regimes, geopolitical issues, and funding uncertainties as everyone else.
We hope these will settle in the next 2–4 months. From our side, we will focus on maintaining utilisation, improving SG&A leverage by growing that at a slower rate than revenues, and executing on cost optimisation. That should help us achieve our goals.
Q: You have been maintaining that you aim to achieve $2 billion in revenue by FY27, and $5 billion by FY31. Despite the tough macro environment, tariffs, and recession fears in the US, what’s driving your confidence? A: Let me answer in reverse. In the COVID year, while most companies in the industry de-grew, we grew at 12.
9%. Our CAGR over the last four years has been over 24%, compared to the industry average of around 6–8%. We have delivered 20 sequential quarters of healthy growth.
That’s point one. Point two: we delivered $375.2 million this quarter.
Multiply that by four—that’s over $1.5 billion, our entry point for the year. We have two years to go from $1.
5 billion to $2 billion and then build up from there. We also have a good capital allocation strategy. We declared a ₹15 final dividend, bringing the total dividend for the year to ₹35, which is roughly a 40% payout ratio.
We are exploring scaled acquisitions in Europe and the US—both to build capabilities and support horizontal growth areas such as GenAI, like we did with the Starfish acquisition in contact centres. We see good organic momentum and may supplement it with targeted acquisitions. That’s why we remain confident in hitting $2 billion on the path to $5 billion—and we will keep you updated as we move forward.
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