Persistent Systems Shares Drop 3% After Soft Q2 Profits

Persistent Systems shares fell more than 3 percent on Friday after the IT services firm reported a sharp sequential drop in quarterly profit and missed margin expectations, even as revenue grew strongly. The stock closed down 3.4 percent at Rs 5,640 after sliding as much as 6 percent intraday. It was among the biggest midcap losers and one of only two declining stocks in the Nifty IT index, which rose 3.1 percent. Consolidated net profit for the September quarter fell 27 percent sequentially to Rs 351.5 crore. The decline was partly due to a one-time expense of Rs 185.34 crore linked to the Nagarro acquisition. Revenue, however, rose over 8 percent quarter-on-quarter to Rs 4,664 crore. Operating margins (EBIT) contracted 100 basis points to 15 percent, below the estimated 15.5 percent. The company attributed the pressure to wage hikes, lower utilisation and deal-related amortisation. Management expects margins to recover toward its 16-17 percent aspirational range.