Coforge, Persistent Systems continue on growth path with stable leadership position

While the two companies have adopted different strategies as they chase their next $1 billion goals, one common thread in their growth so far is stability at the top.

Pune-based Persistent Systems reported revenue growth of 5.27% sequentially and 18.4% year-on-year to $345.5 million, marking the second consecutive quarter of revenue growth of more than 5% sequentially and the 18th consecutive quarter of overall revenue growth. Most of this growth came from North American customers, which contributed $16 million, accounting for approximately 92% of the company’s incremental revenue of $17.3 million.

The company’s net profit increased 5.4% month-on-month to $38.7 million.

Noida-headquartered Coforge has higher revenue and growth than Perspective. The company’s revenue increased by 26.8% month-on-month and 32.8% year-on-year to $369.4 million.

The Americas region contributed $58.3 million, accounting for approximately 75% of the company’s $78.4 million sequential incremental growth. Excluding acquisition discounts, Coforge’s revenue was $309.8 million, an increase of 6.3% from the previous quarter.

Coforge said in May it would acquire Hyderabad-based Cigniti Technologies, an AI and IP-led digital assurance and engineering services company, after spending $220 million to acquire 54% of the company by September of shares. The acquisition, its largest, will give Coforge a shot in the arm by establishing three new verticals in retail, high-tech and healthcare.

vertical performance

Coforge said in a statement filed with the stock exchange on May 2, 2024 that after the merger, annual operating costs in the retail sector will be close to US$100 million, while annual operating costs in the high-tech and healthcare sectors will be approximately US$50 million Dollar. Creating scalable vertical markets in these three areas will provide significant leadership advantages through acquisitions.

While the company doesn’t disclose revenue from the retail, high-tech, manufacturing and healthcare verticals, it categorizes revenue from these verticals as “other” and is currently its second-largest cash cow. Coforge received $96 million, or $25.9. The segment accounted for % of its revenue in the quarter ended in September, meaning Coforge earned $34.6 million, or 44% of its incremental revenue, from customers in the “other” vertical.

“Cross-selling of services is something we are absolutely comfortable with because we spend a lot of time talking to Cigniti’s sales team, all levels of the sales team, and it’s not the recovery in the demand environment that’s driving cross-selling to a large extent. – sales efficiency,” Coforge CEO Sudhir Singh said on an Oct. 23 post-earnings call with analysts. “The team is ready and hungry, and our lateral business units are ready.”

Coforge reported net profit for the quarter of $30.8 million, an increase of 8.45% quarter-on-quarter, mainly due to the Cigniti acquisition.

Healthcare and life sciences, on the other hand, was Persistent System’s best-performing vertical as customers in this space contributed nearly half of the company’s incremental revenue of $17.3 million.

In terms of headcount, Persistent Systems ended the quarter with 23,237 employees, a decrease of 613 from the start of the fiscal year. However, Coforge has grown its headcount both organically and through the acquisition of Cigniti. The company recorded its highest quarterly headcount growth last quarter. Last month, the company had 32,483 employees, a net increase of 5,871 from the previous quarter, including 4,430 employees from Cigniti.

While Coforge’s acquisition of Cigniti is expected to expand the company’s financial resources, for Persistent the focus is on top customers. For the past four years, Persistent has sought to scrap contracts that didn’t bring the company much business.

“We are not trying to renew the contract because it is much smaller and the company does not have the inclination to grow with us and so on. So we have been doing a level of rationalization gradually over the last four years,” Persistent Systems CEO San Sandeep Kalra said at the post-earnings conference on July 19.

The company held off-site meetings with 250 senior leaders in New Jersey, focusing on Percient’s top 100 customers.

Sameer Pardikar, vice president of institutional equity research at Elara Capital, said in a dated report: “Long-term growth drivers – broad-based growth across industries and geographies and a focus on the top 100 accounts – will drive growth in the coming quarters. ” October 23rd.

stable leadership position

Coforge and Persistent both aim to reach $2 billion in revenue within the next three years. While there may be multiple ways for both companies to achieve growth, the key so far has been stability at the top. Sandeep Kalra has been CEO of Persistent since October 2020, while former Infosys executive Sudhir Singh has been at the helm of Coforge since May 2017.

At least three of India’s top five software services companies have changed CEOs in the past 18 months, bringing stability to their leadership.

“Execution is the unique thing about these two companies (Coforge and Persistent Systems). They are very rigorous in how they do things and the long-term leadership of the company is what makes this difference.” A Mumbai-based analyst express. Mint On condition of anonymity.

Coforge and Persistent Systems become the latest members of India’s IT billion-dollar club after revenue crossed the $1 billion mark in March last year. Coforge ended fiscal 2024 with $1.12 billion in revenue, up 11.7% year-over-year, while Persistent Systems posted 14.5% growth, finishing with $1.19 billion in revenue.

Larger peers such as Tata Consultancy Services, Infosys and HCL Technologies all posted single-digit growth, mainly due to their larger scale. As of the end of fiscal 2024, the revenue of TCS, Infosys and HCLTech was US$29.1 billion, US$18.6 billion and US$13.3 billion respectively, a year-on-year growth of 4.1%, 1.9% and 5.4% respectively.

Persistent Systems was founded in 1990 by former HP employee Anand Deshpande. Currently, he holds 29.35% of the company’s shares, becoming the company’s single largest shareholder. The company’s market capitalization is $89,169.79 Crores.

Coforge, formerly known as NIIT Technologies, was established in 2004 as an independent company. It was acquired by Barings Private Equity in 2019. It is fully owned by the public and has a market capitalization of $50,323.46 Crores.