Persistent Systems Ltd. FALL AS PROFITABILITY MISSES

Persistent Systems shares declined more than 3 percent after the IT services company reported weaker-than-expected profitability for the September quarter, despite robust revenue growth. The stock fell 3.4 percent to Rs 5,640 in afternoon trade after dropping as much as 6 percent during the session. It emerged as one of the top midcap losers and was among the only two constituents of the Nifty IT index to trade lower, even as the index gained 3.1 percent. The stock has declined 10.2 percent so far in 2026, compared with an 11.7 percent fall in the Nifty 50. Persistent Systems' market capitalisation stood at approximately Rs 89,000 crore. The company's consolidated net profit fell 27 percent sequentially to Rs 351.5 crore in the September quarter. The decline was partly attributable to a one-time expense of Rs 185.34 crore related to the Nagarro deal. In contrast, revenue grew more than 8 percent quarter-on-quarter to Rs 4,664 crore. Profitability remained under pressure as the earnings before interest and tax margin contracted by 100 basis points to 15 percent, below analysts' expectations of 15.5 percent. The margin decline was driven by wage hikes, lower employee utilisation and amortisation expenses associated with the deal. Despite the near-term pressure, Persistent Systems expects margins to improve towards its aspirational range of 16-17 percent. Experts retained its 'Hold' rating on the stock but lowered its target price to Rs 5,450 from Rs 5,500. The revised target indicated approximately 7 percent downside from Thursday's closing price. The brokerage highlighted geopolitical and macroeconomic uncertainties that could delay deal closures. It also raised concerns about the company's expensive valuations and the risks associated with the Nagarro acquisition, which could weigh on investor sentiment.