Persistent Systems Limited (PSL) is one of the market leaders in Outsourced software Product Development (OPD) services. It designs, develops and maintains software systems and solutions, create new applications and enhance the functionality of its customers’ existing software products.

Issue Details
Listing NSE & BSE
Offer Open date 17th March 2010
Offer Close date 19th March 2010
Promoter Dr. Anand Deshpande
Price Band 290-310
Industry IT

Equity shares prior to issue (Cr) 3.6
Shares offered (Cr) 0.4
Equity shares post Issue (Cr) 4.0

Shareholding Pre Issue Post Issue
Promoters 43.3 38.9
Others 56.7 61.1
Total 100.0 100.0

Key Investment Highlights

One of the leading players in the OPD segment
PSL is an OPD specialty company, offering its customers the benefits of offshore delivery. Over the past five years, it has contributed to more than 3,000 product releases for its customers. It has been recognised as one of the leading technology companies in the Deloitte Touche Tohmatsu Technology Fast 500 Asia Pacific 2009.

Offers full product development services including value addition
It provides a broad range of services to its customers that support their software products throughout the full product life-cycle. These offerings are suitable for companies of all sizes. Its services range from research and prototyping, development and testing, consulting services and deployment, and support and maintenance

Backed by strong financials
Over a three-year time frame, Persistent Systems has seen its revenues grow at a compounded annual rate of 40 per cent to Rs 600.6 crore in 2009, while net profits grew at 22.3 per cent to Rs 66.9 crore. It also has been enjoying net margins in excess of 16 per cent consistently over the last several years, barring 2008-09, when it was hit by a 170 per cent increase in operating and other expenses

Key Concern: Tax burden to increase beyond FY11
If the tax exemption under STPI scheme is not renewed beyond FY11, Persistent’s tax as a percentage of profit before tax is likely to jump to 20-25 % from less than 10% now. It may reduce its net margin by over 100 bps. To mitigate this impact, the company has decided to invest in its SEZ in Hyderabad. New projects will be executed from the SEZ unit, which would enjoy tax exemption

Valuation & Recommendation
At the higher end of the price band i.e. at Rs 310, PSL is available at an attractive P/E of 11.7 based on annualised profit of the first nine months of 2009 and post IPO equity. Being a pure play OPD company & the segment also poised for healthy growth over the next few years, we recommend a SUBSCRIBE on the company for listing gains as well as for a medium to long term horizon.

Company Background
Persistent Systems Limited (PSL) is one of the market leaders in Outsourced software Product Development (OPD) services. It is an OPD specialty company, offering its customers the benefits of offshore delivery. It designs, develops and maintains software systems and solutions, create new applications and enhance the functionality of its customers’ existing software products.

Its OPD services allow its customers to release management bandwidth, to reduce time-tomarket,
improve the quality of their products, reduce risk of failure during the engineering development process, improve predictability and reliability of the engineering process, while helping them lower their over-all product engineering costs. It has depth of experience in the focused areas of telecommunications, life sciences and infrastructure. It has invested and plans to continuously invest in new technologies and frameworks in the areas of cloud computing, analytics, enterprise collaboration and enterprise mobility. Its customers range from several global software companies to early-stage companies that are developing. As of December 31, 2009, it has over 37 customers that have over $1 billion in annual revenue. It has already built a team of more than 3,700 software
professionals well versed in the product development process.

Tags: ipo listing 2010, Persistent Systems Limited, psl ipo

Similar Posts:

• CTE acquires Q-Soft Systems & Solutions
• R Systems acquires Sento Europe for Rs 12cr
• R Systems reports revenues Rs 79.88cr
• Infogain completes acquisition of Spider Systems
• Fixed Price Avon Weighing Systems IPO Subscribed 45 Times