BUY Persistent Systems at Rs. 745 with a Target of …...Report By : Vikash Kandoi – [email protected]; Surbhi Lohia – [email protected] BUY Persistent Systems at

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Report By : Vikash Kandoi – [email protected]; Surbhi Lohia – [email protected]

BUY Persistent Systems at Rs. 745 with a Target of Rs. 940

mailto:[email protected]

mailto:[email protected]

Page 2 Source: Company, www.dynamiclevels.com

Persistent Systems - A Breakthrough in Software Services

Company Overview and Stock price ……………………………….……3

Company’s Milestone ………………………..………………...…….….…..4

Product Overview……………………………………………………….….…..5

Persistent & its Subsidiaries…………….……………………….….…..…8

Industry Outlook ……………………………....………….…..….….……...9

Company Financials………………………………………………….….…..12

Peer Comparison and Shareholding ...…………….………….….…..15

Company’s Future Outlook…………………………………….……..…..18

IBM Deal……………………………………………………..……………....….21

Investment Rationale…………………………………….………….......…22


Company’s Overview and Stock Price

Persistent Systems was incorporated on May 30, 1990. On 17th September 2010 Persistent Systems Private Limited was converted into a public Limited company with the name Persistent Systems Limited.

Shares of Persistent were listed on National Stock Exchange of India on March 2010.

Persistent System offers complete product life cycle services. Company has a global presence having specialization in software product, services and technology innovation.

Company has its Branches at Australia, Germany, Japan, Malaysia, South Africa, The Netherland and United Kingdom.

Persistent had tied up with IBM to jointly work on the Internet of Things (IoT) platform, last month. Anand Deshpande, MD and CEO of Persistent Systems said that the deal with IBM contributed 8 % to its revenue in March quarter and he further expects it to increase to 15-20 % in fiscal year 2017.

Chart Hypothesis: Above is a daily price chart of Persistent with volume, in which we can see that huge buying is seen at 600 levels along with surge in volume. Every time stock comes to this level price gives a sharp upward movement.

COMPANY PROFILE OF PERSISTENT NSE, INDIA

Date of Incorporation 30-May-90 Date of Listing 6-Apr-10

Management Name Designation

Thomas W Kendra Addnl. & Ind.Director Mritunjay Singh COO & Executive

Director Anand Deshpande Founder Chairman &

Mng. Director Sanjay Bhattacharyya

Independent Director

Roshini Bakshi Independent Director Prakash Telang Independent Director Pradeep Bhargava Independent Director Kiran Umrootkar Independent Director Anant Jhingran Independent Director Roshini Bakshi Independent Director

Registered Office Address Bhageerath,No.402, Senapati Bapat

Road,411016,Pune,Maharashtra,India Website

http://www.persistent.com

Persistent Share Price Performance

EXCHANGE SYMBOL PERSISTENT

Current Price * (Rs.) 745.00

Face Value (Rs.) 10.00

52 Week High (Rs.) (20-May-15) 820.80

52 Week Low (Rs.) (20-Jul-15) 574.90

Life Time high (Rs.) (02-Jan-15) 960.15

Life Time low (Rs.) (19-Aug-11) 140.50

Average Daily Movement 25.26

Average Volume [20 days] 126396

1 Month Return (%) -1.15

P/E Ratio (x) 19.31

Book Value 212.86

Market Cap (Cr) 5749.20

% of Promoter holding pledged 0


Company’s Milestone

Year Milestone

1990 Persistent is incorporated on May 30, 1990. Begins operations at STP, Pune.

1991 Persistent becomes the first company to become operational at STP in India; also the first company to export from STP India. Microsoft becomes Persistent's customer

1993 Persistent's annual turnover crosses Rs. 5 Million. Receives the Export Achievement Award

1994 'Kapilvastu', the first owned development centre of Persistent, becomes operational. Hewlett-Packard becomes a Persistent customer.

1995 Persistent's turnover crosses Rs. 10 million. Persistent announces its first bonus issue (15:1).

1996 Persistent takes over Intrix Systems Pvt. Ltd., a 100% subsidiary of Intrix Systems Group, USA.

1997 Persistent rated among 15 emerging companies in a special issue of DataQuest, awarded First Prize from Govt. of Maharashtra (Small Scale Division) for Export Performance.

2000 Persistent's annual turnover crosses Rs. 100 million. Gets investment by Intel 64 Fund LLC, a VC fund. Forms 'Persistent eBusiness Solutions Private Limited' in India.

2001 Persistent sets up Persistent Systems, Inc., a C-Corporation at California, USA.

2003 Persistent acquires land at the Hinjawadi IT Park, Pune. Persistent sets up a branch office in UK. Persistent sets up a development center at Nagpur, India.

2005 Persistent sets up a branch office in Tokyo, Japan. Begins operations at 'Aryabhata-Pingala', new owned premises at Pune, India. It acquired Goa-based ControlNet (India) Private Limited and sets it up as a development center.

2006 Persistent is ranked among the Top 50 fastest growing Indian technology companies by Deloitte Touche, Asia Pacific, 2006. Gets joint investment by Norwest Venture Partners (NVP) and Gabriel Venture Partners (GVP).

2007 Persistent form Persistent Systems pte Ltd in Singapore. Wins Red Herring 100 Global award 2007. Opens a branch in Netherlands.

2008 Persistent's annual consolidated turnover crosses Rs. 5,000 Million. Sets up office in Canada.

2009 Persistent acquires assets of Paxonix, Inc. Receives ISO 9001:2008 Certification for software product design, development, testing, enhancement and support.

2010 Persistent completes IPO 93 times oversubscribed. Persistent is named Indian IT Company of the Year by Bloomberg UTV.

2011 Persistent sets office in Grenoble, France.

2012 Persistent establishes a branch office in Australia. Sets up a branch office in KL, Malaysia. Acquires Innovative Cloud Platform Business from Doyenz, Inc

2013 Persistent establishes a branch office in Australia. Acquires certain assets of NovaQuest, a value-added reseller of Dassault Systems. Forms 'Persistent Systems Malaysia Sdn. Bhd. at KL. Opens Collaborative Software Development Center in Dublin, Ohio.

2014 Persistent creates 'Accelerite' to take products and solutions to market. Persistent acquires CloudSquads. Persistent Venture Fund (PVF) is formed. Establishes branch offices in Germany and South Africa.

2015 2015- Persistent launches Persistent Computing Institute (PCI) . Persistent wins the DQ Live Business Technology Award 2015 for 'Excellence in Implementation & Use of Technology for Business Benefits'. Forms a Research and Innovation Board. Achieves 3,000+ product releases and reaches 350 global clients. Announces its fourth bonus issue (1:1).


Product Overview

Products & Solutions Accelerite

Digital Banking- Financial Services Technology

Connected Healthcare

Accelerite: Accelerite is a provider of cloud solutions, endpoint

management, and mobility to some of largest enterprises in the world.

Accelerite Products include:

Radia: Consistenly and efficiently manage all the endpoint

devices in an enterprise

Rovius: Versatile, enterprise-grade disaster recovery solution.

Convirt: Enterprise self-service solution for hybrid clouds.

Aepona: Platform for developing IoT services that can be

deployed in any cloud.

rCloud: Cloud-based disaster recovery - Seamless recovery in

minutes.

CloudPlatform: Public or private cloud solution with ease of

use and workload orchestration.

CloudPortal Business manager: IT-as-a-Service with

provisioning, billing, and metering and user management.

Digital Banking Solutions:

OutsideCore: A platform which enables a Bank to launch

Complex Digital Offerings quickly. Check out how you can

integrate with a banks existing core Business Applications

while rapidly building new Apps/Experiences/Offerings & cater

to quickly changing demands of your Digital customer with

OutsideCore

BuddyPay- BuddyPay’ is an innovative concept, which is essentially a mechanism to transfer control to a second person (Payer) to complete a transaction (can be a Payment, Booking or Ordering) initiated by first person (Buyer). ‘BuddyPay’ redefines the buying experience and benefits E-Commerce/ Online sites, Insurance Case Management, Stores, Booking sites and Sellers like Wallets & Banks.

124674179

3334

3144

Business segment (in Millions)

Infrastructure

Financial Services

Telecom

Life Sciences

Business Segments in INR (2016)

Sales (M)

Infrastructure 12467 Financial Services 4179 Telecom 3334 Life Sciences 3144


The Blockchain Landscap:

1. Cryptographic guarantees – All transactions on the blockchain are signed by end-users. This cryptographic guarantee allows for verification of the transaction with the user’s public key. Signing guarantees the authenticity, integrity and non-repudiation of that transaction.

2. Pseudonymity – Each entity within the blockchain network transacts with a generated address, which does not reveal the real identity of the user. This allows a certain amount of privacy on all transactions.

3. Immutability - The transaction broadcasted to the blockchain network has to be confirmed and included as part of the distributed ledger. Once confirmed, the transaction cannot be changed and stays in the ledger forever. No entity can delete or rollback transactions once they are included as part of the distributed ledger.

4. Shared Read and Write – The blockchain is either public or private within a limited set of entities. All concerned participants have visibility into the blockchain and can independently verify any transaction within it. All participants can generate transactions that can be added to the shared ledger.

5. Auditability and Transparency – All transactions on the blockchain are validated and timestamped after the transaction is verified and included in the distributed ledger with distributed consensus. This accounts for a global truth that any node in the future can verify and no node in the network can change the data that is part of this distributed ledger. This improves accountability as well as transparency for the data that is included in the blockchain.

6. Distributed ownership - In case of public blockchains, no entity owns the blockchain but all of them can add to the ledger and validate transactions. In a consortium blockchain, all participants own the blockchain equally and they can change the ledger by a super-majority of votes or other forms of distributed consensus algorithms.

Mobile banking: Persistent Systems helped enhance the existing solution substantially by incorporating triple play delivery into it. The most notable features being:

Mobile Banking via Text Message

Mobile Banking via Mobile Web

Mobile banking using a Mobile


Others features that Persistent developed included:

Mobile Web Application

Account and Security Alerts

Batch Loader and Processor

Mobile Banking Enrollment

SMS Banking

Smart Client (iPhone)

Customer Support application

Connected Healthcare

Connected Moments: Design Thinking for Improved

Patient Engagement in Healthcare

Digitizing the Customer Focus – A Key for US Healthcare

One Organization, One Digital Platform: Connecting Data,

People & Technologies

Repeatability: Expanding Care Delivery Capabilities

Collaborative Care: Eliminating Silos

Patient 360: Bringing Disparate Information into One View

Extensible and Portable Care: Innovating with Virtual

Medicine

Smart Workflows: Embedding Analytics & Algorithms into

ProcessesLean Processes: Going Digital Without the Waste

Effective Engagement: Creating Interactive Experiences for

Patients & Families

IoT: Integrating Devices into the Care Team


Persistent & it’s Subsidiaries:

USA based Persistent System, Inc, is a wholly owned subsidiary of Persistent System Ltd engaged in software product, services and technology innovation.

Singapore based wholly owned subsidiary Persistent System Pte is a wholly owned subsidiary of Persistent System Ltd engaged in software development, professional and marketing services.

France based Persistent System France SAS is a wholly owned subsidiary of Persistent System Ltd engaged in software product, services and technology innovation in life science domain.

Malaysia based Persistent System Malaysia Sdn Bhd is a wholly owned subsidiary of Persistent System Ltd engaged in software product and services.

USA based Persistent System Solution, Inc, is a wholly owned subsidiary of Persistent System Inc engaged in software product, services and technology innovation.

USA based CloudSquads, is a wholly owned subsidiary of Persistent System Inc is an innovative consultancy that deploys, integrate and run social communities on social customer platforms to provide insights that drive improvement in marketing, sales and customer services.

USA based Akshat Corporation is a wholly owned subsidiary of Persistent System Inc engaged in development, delivery and maintenance of IT software and services.

Ireland based Aepona Holding Limited is a wholly owned subsidiary of Persistent System Inc operates as a holding company of Aepona Group Limited.

UK based Aepona Limited is a wholly owned subsidiary of Aepona Group Limited engaged in business of telecommunication API gateway.

Ireland based Valista Limited is a wholly owned subsidiary of Aepona Group Limited operates as the holding company of Aepona Groups Limited.

Srilanka based Aepona Software (Private Limited) is a wholly owned subsidiary of Valista Limited has adopted indirect sales model with services revenue being billed to Aepona Limited. Sale of services is then contracted between Aepona Group Limited.

US based Valista Inc is a whilly owned subsidiary of Valista Limited.

Name of Subsidiary Country of

incorporation

Persistent System Inc USA

Persistent System Pte Ltd Singapore

Persistent System France SAS France

Persistent Telecom Solution Inc USA

Persistent System Malaysia Sdn Bhd

Malaysia

CloudSquads Inc USA

Akshat Corporation USA

Aepna Holding Limited Ireland

Aepona Group Limited Ireland

Aepona Limited UK

Valista Limited Ireland

Valista Inc USA

Aepona Software Private Limited

Sri lanka

Persistent System Mexico S.A Mexico

Persistent System Israel Ltd Israel


IT& ITeS Industry Outlook

Why investing in IT & ITeS Industry in India is a priority

India is considered as the world’s largest sourcing

destination for the information technology (IT) industry.

Accounting for approximately 67 per cent of the US$ 124-

130 billion market.

10 million workforces are being employed by the

companies.

The industry has led the economic change of the country

and changed the insight of India in the global economy.

India's cost competitiveness in providing IT services, which

is about 3-4 times cheaper than the US, continues to be

the support of its unique selling proposition (USP) in the

global sourcing market.

India is gaining importance in terms of intellectual capital

with a number of global IT firms setting up their innovation

centres in India.

The IT industry has created significant demand in the

Indian education sector, especially for computer science

and engineering.

Four major segments of the Indian IT and ITeS industry are:

1. IT services, 2. Business process management (BPM) 3. Software products and engineering services 4. Hardware

The IT-BPM sector in India grew at a Compound Annual

Growth rate (CAGR) of 15 per cent over 2010-15, which is

3-4 times higher than the global IT-BPM spend, and is

estimated to expand at a CAGR of 9.5 per cent to US$ 300

billion by 2020.


Market Size

The Indian Information Technology (IT) sector is expected to

triple its current annual revenue to reach US$ 350 billion by FY

2025 and to grow 11 per cent per annum, as per NASSCOM.

According to NASSCOM and Zinnov Management Consulting

Pvt Ltd India is the fourth largest base for new businesses in

the world and home to over 3,100 tech start-ups, is set to

increase its base to 11,500 tech start-ups by 2020.

By 2018 India’s internet economy is expected to touch Rs 10

trillion (US$ 151.6 billion) accounting for 5 per cent of the

country’s gross domestic product (GDP).

Providing Job Solution

India has been creating work force of more than 1,50,000

employees for SMAC skills.

Almost 30,000 employees are skilled in enterprise mobility and

more than 50,000 are skilled in analysis.

The SMAC (social, mobility, analytics, cloud) market is expected

to grow to USD 225 Billion by 2020.

With Digital India Campaign government will invest 20 Billion.

This will cover mobile connectivity throughout the country.

Digital India Pillars of Digital Programme

Broadband Highways

Universal Access to Mobile Connectivity

Public Internet Access Programme

e-Governance – Reforming Government through Technology

eKranti - Electronic delivery of services

Information for All

Electronics Manufacturing

IT for Jobs

Early Harvest Programmes


FDI Policy

In data processing, software development and computer

consultancy services, software supply services, business and

management consultancy services, market research services,

technical testing and analysis services government has permitted

up to 100% Foreign Direct Investment (FDI) is under the automatic

route.

Increasing Indian talent pool;

• India has become global outsourcing hub as skilled English speaking workforce has increased in India. • Number of graduate’s added to talent pool during FY08-15 in India grew at a CAGR of 9.4 per cent • During FY15 around 5.8 million graduates were added to the talent pool of India. • R&D and innovation business in the IT-BPM space has become easy with growing talent pool of India


Company Financials

Profitability Highlights

Company has not posted negative PAT in last 7 years.

Profit Margins are consistent with more than 15% in last 7

years.

Consistent increase in turnover in last 7 years by more than

15% yoy.

Persistent is a cash rich company pays dividend every year.

Company maintains its operating profit margin from 15% to

20%

Income Statement figure in crs

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

March’10 March’11 March’12 March’13 March’14 March’15 March’16 March’11 March’12 March’13 March’14 March’15

Turnover 601.16 775.84 1,000.31 1,294.51 1,669.15 1,891.25 2,312.33 - Operating Expenses 487.47 658.77 827.07 1,036.01 1,339.13 1,588.95 1,995.06 Operating profit (loss) 113.69 117.07 173.24 258.50 330.02 302.30 317.27 - Interest Expense

0.04 0.05

- Foreign Exchange Losses (Gains) (3.16) (17.32) 1.64 22.24 14.93 (46.92) NA - Net Non-Operating Losses (Gains) (7.23) (15.97) (25.26) (26.76) (27.62) (40.75) (78.36) Pretax Income 124.07 150.35 196.87 262.99 342.66 389.97 395.63 - Income Tax Expense 9.05 10.62 55.09 75.37 93.38 99.34 98.27 Income Before XO Items 115.02 139.74 141.78 187.62 249.28 290.63 297.36 Net profit (loss) 115.02 139.74 141.78 187.62 249.28 290.63 297.36 Basic EPS 17.87 18.52 18.51 24.31 16.02 36.84 37.17 Basic Weighted Avg Shares 64.37 75.45 76.59 77.18 155.63 78.89 80.00 Diluted EPS 16.03 17.47 17.72 23.45 15.58 36.33 37.17 Diluted Weighted Avg Shares 71.77 80.00 80.00 80.00 160.00 80.00 80.00 EBITDA 147.21 159.46 234.34 336.79 432.62 396.16 413.79 EBITDA Margin (T12M) 24.49% 20.55% 23.43% 26.02% 25.92% 20.95% 17.89% Operating Margin 18.91% 15.09% 17.32% 19.97% 19.77% 15.98% 13.72% Profit Margin 19.13% 18.01% 14.17% 14.49% 14.93% 15.37% 12.86% Dividends per Share 1.00 1.75 3.00 4.50 6.00 12.50 8.00 Total Cash Common Dividends 97.93 140.00 240.00 360.00 480.00 800.00 640.00 Interest Income 0.10 2.36 10.12 9.26 9.15 11.65 NA Research & Development Expense 5.21 4.75 4.47 2.79 3.96 6.22 NA Personnel Expense 368.74 512.30 599.05 718.76 908.97 1,111.37 1,382.83 Export sales 474.36 560.71 732.88 909.73 1,064.93 1,133.09 NA Depreciation Expense

42.39 61.10 38.83 43.84 48.56 57.08

Rental Expense 3.04 3.84 6.20 10.38 7.87 9.88 NA

Profitability Ratios %

3/13 3/14 3/15 3/16 3/17E

EBITDA Margin

26.0 25.9 20.9 17.9 17.2

Operating Margin

20.0 19.8 16.0 13.7 14.0

Profit Margin

14.5 14.9 15.4 12.9 11.8

Return on Assets

16.4 17.7 17.5 15.3 17.5

Return on Equity

20.2 22.3 22.1 19.5 19.9


Balance Sheet Highlights:

Company has shown appreciation of in its assets 131% from

Rs. 91.03 in 2011 to Rs. 210.65 in 2016.

Company’s long term borrowing has not shown any

significant increment yoy.

Retained earnings have increased from Rs. 53.34 to 155.93

almost 3 times since 2011.

Balance Sheet FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Figure in crs. March’11 March’12 March’13 March’14 March’15 March’16

Assets

Cash & Near Cash Items 2.30 4.33 4.98 8.32 9.87 14.32

Short-Term Investments 31.57 19.36 31.28 40.72 46.20 48.28

Accounts & Notes Receivable 15.82 20.33 24.51 30.28 35.86 42.75

Other Current Assets 9.98 7.03 8.01 13.13 14.53 26.00

Total Current Assets 59.66 51.05 68.78 92.46 106.46 131.36

LT Investments & LT Receivables - 10.02 2.03 9.33 25.44 21.99

Net Fixed Assets 22.13 29.86 39.75 30.93 30.97 44.53

Gross Fixed Assets 39.05 49.77 62.94 58.25 62.06

Accumulated Depreciation 16.92 19.91 23.19 27.32 31.09

Other Long-Term Assets 9.25 11.20 16.15 21.63 14.62 12.78

Total Long-Term Assets 31.37 51.08 57.93 61.89 71.03 79.30

Total Assets 91.03 102.12 126.71 154.34 177.49 210.65

Liabilities & Shareholders' Equity

Accounts Payable 4.06 2.57 3.19 4.34 5.29 16.51

Short-Term Borrowings - - - - 0.21 -

Other Short-Term Liabilities 10.80 14.72 15.16 23.51 29.99 28.70

Total Current Liabilities 14.86 17.30 18.35 27.85 35.49 45.21

Long-Term Borrowings - 0.07 0.14 0.32 0.25 0.26

Other Long-Term Liabilities 1.46 0.71 6.39 3.94 1.20 1.26

Total Long-Term Liabilities 1.46 0.77 6.53 4.26 1.45 1.51

Total Liabilities 16.32 18.07 24.89 32.11 36.93 46.72

Share Capital & APIC 21.37 21.37 21.37 21.37 21.37 8.00

Retained Earnings & Other Equity 53.34 62.68 80.46 100.87 119.19 155.93

Total Equity 74.71 84.05 101.83 122.23 140.55 163.93

Total Liabilities & Equity 91.03 102.12 126.71 154.34 177.49 210.65

Leverage and Coverage Ratios

3/13 3/14 3/15 3/16 Current Ratio

3.70 3.30 3.00 2.90

Quick Ratio 3.30 2.80 2.60 2.30 Tot Debt/Capital

0.00 0.00 0.00 0.00

Tot Debt/Equity

0.00 0.00 0.00 0.00

Eff Tax Rate %

28.70 27.30 25.50 24.80


Cash Flow Highlights:

Company has not made any significant capital expenditure in

FY15-16

Cash Flow FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Figures in Crs March’10 March’11 March’12 March’13 March’14 March’15

Cash From Operating Activities Net Income 115.02 139.74 141.78 187.62 249.28 290.63 Depreciation & Amortization 33.52 42.39 61.10 78.29 102.60 93.85 Other Non-Cash Adjustments (32.93) (16.92) 23.20 10.30 (1.88) (14.74) Changes in Non-Cash Capital 49.85 4.81 (31.82) (47.00) (51.42) (27.62) Cash From Operations 165.46 170.02 194.26 229.20 298.58 342.12 Cash From Investing Activities Disposal of Fixed Assets 0.10 0.18 0.30 0.41 0.27 0.33 Capital Expenditures (47.64) (97.17) (174.33) (115.57) (58.13) (95.69) Increase in Investments (708.90) (1,552.78) (105.00) (57.03) (1,314.25) (1,545.69) Decrease in Investments 637.88 1,384.41 75.34 92.05 - - Other Investing Activities - - 53.91 (104.03) 1,158.51 1,378.74 Cash From Investing Activities (118.55) (265.36) (149.79) (184.17) (213.60) (262.31) Cash from Financing Activities Dividends Paid (2.70) (27.99) (23.26) (39.49) (51.45) (66.73) Change in Short-Term Borrowings Increase in Long-Term Borrowings - - 0.65 0.77 1.77 1.30 Decrease In Long-Term Borrowings Increase in Capital Stocks 124.59 Decrease in Capital Stocks Other Financing Activities 4.51 (43.24) (1.47) 0.13 (1.89) 1.14 Cash from Financing Activities 126.40 (71.23) (24.08) (38.59) (51.58) (64.29) Net Changes in Cash 173.31 (166.57) 20.39 6.44 33.40 15.53 Reference Items EBITDA 147.21 159.46 234.34 336.79 432.62 396.16 Trailing 12M EBITDA Margin 2.45 2.06 2.34 2.60 2.59 2.09 Cash Paid for Taxes 24.75 34.23 38.13 59.57 97.69 100.08 Cash Paid for Interest - - 0.23 Free Cash Flow 117.82 72.85 19.92 113.63 240.45 246.44 Free Cash Flow to Firm 113.65 240.49 246.69 Free Cash Flow to Equity 117.93 73.03 20.88 114.80 242.49 248.07 Free Cash Flow per Basic Share 1.83 0.97 0.26 1.47 1.55 3.12 Price to Free Cash Flow 1.90 6.09 1.85 3.40 2.29 Cash Flow to Net Income 0.14 0.12 0.14 0.12 0.12 0.12


Peer Comparison

Company Name: PERSISTENT SYS MINDTREE WIPRO LTD TATA CONSULTANCY INFOSYS

Latest Fiscal Year: 03/2016 03/2016 03/2016 03/2016 03/2016 52-Week High 820.80 804.50 613.30 2,770.00 1,267.90 52-Week High Date 5/20/2015 3/4/2016 10/1/2015 10/5/2015 4/18/2016 52-Week Low 574.90 585.50 507.90 2,115.00 932.55 52-Week Low Date 6/29/2015 4/27/2015 2/29/2016 2/29/2016 7/10/2015 Current Price: 752.05 708.00 559.65 2,503.40 1,238.75 52-Week High % Change -8.0% -12.0% -8.7% -9.6% -2.3% 52-Week Low % Change 31.1% 23.1% 10.2% 18.4% 32.8% Total Common Shares (M) 80.0 167.8 2,470.7 1,970.4 2,285.6 Total Debt 2.57 82.90 125,22.10 2,44.83 - - Cash and Equivalents 6,25.99 4,34.80 231,99.30 292,02.10 327,72.00 Current Enterprise Value 53,92.98 115,27.36 1,278,18.67 4,646,73.90 2,526,91.09

Above table shows that all peer stocks are trading near its 52 week high. This implies that sector has strength and has potential to increase shareholders wealth.

FII Holding & P/E Ratio Comparison

INSTRUMENT % FII Holding

P/E Ratio (X)

Debt Equity Ratio (X)

PERSISTENT 7.92 19.65 0.00 ZENSAR 1.66 14.13 0.09 MINDTREE 10.46 19.66 0.00 SASKEN 17.73 0.00 0.00 WIPRO 10.93 15.41 0.21 INFOSYS 40.17 20.99 0.00 TCS 16.83 20.20 0.01

Above table showing FII holding and PE ratio of IT companies, were average PE ratio of industry is 20 and stock is trading at par with industry PE ratio. Company has a decent FII holding of 7.92%.

Profitablity Comparison

INSTRUMENT Net Profit

in Cr Equity in

Cr FV EPS

PERSISTENT 297.36 80.00 10 37.25 ZENSAR 309.15 44.63 10 69.54 MINDTREE 603.30 167.80 10 35.99 SASKEN -26.65 17.72 10 18.46 WIPRO 8892.20 494.10 2 36.20 INFOSYS 134910.00 1144.00 5 59.03 TCS 24291.82 197.04 1 123.28

In FY2016 Persistent has made profit of Rs. 297.36 crs.

Persistent has a FV of 10 and EPS of 37.25

Price & Volume Comparison

INSTRUMENT Price Avg. Volume Market

Cap (Rs. in Cr)

PERSISTENT 749 100207 5846 ZENSAR 975 60047 4377 MINDTREE 702.4 531992 11868 SASKEN 345.05 139770 613 WIPRO 559.35 1943854 136989 INFOSYS 1236.5 3604248 283018 TCS 2508.45 1254003 490597

Company has good market capitalization and average volume is above 1lakh shares which suggest company has good market liquidity i.e. easily tradable in market.

Price Performance Comparison

INSTRUMENT 1M 3M 6M 1Y Post

Budget PERSISTENT 0.52 15.20 10.35 4.27 17.84 ZENSAR 14.23 5.87 5.64 41.54 18.68 MINDTREE 8.65 -4.92 -8.44 18.55 -1.25 SASKEN -14.22 1.14 32.96 54.39 44.98 WIPRO -0.23 0.34 -3.59 3.87 4.51 INFOSYS 2.02 8.23 7.20 24.17 9.90 TCS 0.65 7.33 -1.63 -0.42 12.64

Company has given movement of 18% after budget was announced on 29th Feb 2016. Company has been top performer and has always appreciated shareholders wealth in a longer run.

https://www.dynamiclevels.com/en/persistent-share-price-forecast

https://www.dynamiclevels.com/en/zensar-share-price-forecast

https://www.dynamiclevels.com/en/mindtree-share-price-forecast

https://www.dynamiclevels.com/en/sasken-share-price-forecast

https://www.dynamiclevels.com/en/wipro-share-price-forecast

https://www.dynamiclevels.com/en/infosys-share-price-forecast

https://www.dynamiclevels.com/en/tcs-share-price-forecast























Last 2 Week Delivery Position of Persistent

Date High Price Low Price Total Traded Qty Deliverable Qty Delivery % Qty

12-Apr-16 726.00 712.95 85862 65981 76.85

13-Apr-16 731.00 720.90 36303 23918 65.88

18-Apr-16 776.50 724.35 3,71,342 1,38,862 37.39

20-Apr-16 784.90 760.10 1,24,452 53894 43.31

21-Apr-16 769.40 737.00 80630 46206 57.31

22-Apr-16 754.75 740.10 34262 17165 50.10

25-Apr-16 747.00 714.60 1,10,342 52798 47.85

26-Apr-16 740.50 706.25 2,82,141 1,90,936 67.67

Persistent showed highest deliverable quantity on 18th April for 1.38 Lakhs shares at 730-720 levels and on 26th April for 1.90 Lakhs shares at 740-706 levels. This shows that company is a taking support at 706 to 720 levels with volume.

Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Mar-15

Promoter & Promoter Group (%) 38.50 38.53 38.53 38.53 38.55 Indian 38.50 38.53 38.53 38.53 38.55 Foreign NIL NIL NIL NIL NIL Institutions (%) 34.11 34.31 28.36 31.35 32.26 FII 22.10 7.92 16.61 20.35 22.95 DII 12.01 10.72 11.76 11 9.31 Non Institutions (%) 27.39 27.16 33.08 30.12 29.19 Bodies Corporate 2.38 NIL 2.37 2.67 1.72 Others 20.7 22.18 30.71 27.45 27.47 Custodians 4.31 4.97 NIL NIL NIL Total no. of shares (cr.) 8 8 8 8 8

Persistent shareholding shows that FII investment has more than doubled 7.92 to 22.10% and DII investment is consistent which is very good for the Company.


67.07%

16.95%

5.92%

5.15%

1.72% 1.15%

0.64%1.41%

Geographic Ownership Distribution

Unknown Country

India

Luxembourg

66.76%

31.30%

1.00%0.64% 0.31% Institutional

Ownership DistributionOther

Investment Advisor

Geographic Ownership Distribution

Unknown Country 67.07%

India 16.95%

Luxembourg 5.92%

United States 5.15%

Britain 1.72%

Finland 1.15%

Norway 0.64%

Others 1.41%

Institutional Ownership Distribution

Other 66.76%

Investment Advisor 31.30%

Insurance Company 1.00%

Government 0.64%

Others 0.31%

28.66%

71.12%

0.22%

Ownership Statistics

Ownership (Institutional)

Ownership (Retail & Other)

Ownership (Insider)


Company’s Future Outlook Company started its journey with a small team and with limited resources, in a market that was just forming, to being a global business with a team of more than 8,500 committed individuals. Company has focused on building software products. Essentially, they bring software to life and life to software. They work on all aspects of product development. They are leaders in outsourced product development and have established a product DNA in the Company. Their product DNA and their ability to work across all aspects of product development have helped them scale their business. Company has worked with more than 350 customers bringing life to their products. Some of the best known technology companies are their customers. Working with technology leaders helps them track new technologies and anticipate technology trends. They were one of the earliest companies to focus on cloud computing, analytics (especially big data), collaboration and mobility, and have established partnerships with market leaders. In addition to product development work, they also do product deployment for their customers. For the last few years, they have built a business around acquiring end-of-life and non-strategic assets from their customers. In May 2014, they created a brand, Accelerite, to focus on products that Pesistent has acquired. The Accelerite team is focused on their IP business and is run like a Silicon Valley product company. For the last few years, they have been managing their business along three lines:

Account-led which focuses on customers & their requirements

Platform-led which focuses on platforms & sell-with partnerships

IP-led which focuses on our product business For the last 25 years, their focus has been on working with companies that are in the business of software. With Enterprise Digital Transformation, they are now looking at enterprises that are keen to become software-driven businesses.


Company was involved in the next edition of Satyamev Jayate as their Insights partner. They deployed their big data platform Share Insights to process the large volume of viewer response. They established a new group, Persistent Computing Institute, where they have associated themselves with a leading group of computer scientists in town, who are teaching computer science courses in colleges in Pune. Persistent, software product development has been at the core of their expertise and along with their early investments in SMAC and enterprise digital technology, they are the most uniquely positioned Company to serve the emerging needs of their customers. Over the last 5 years, their focus was on building successful partnerships with platform companies, such as

Sales force

IBM, Oracle

Microsoft

SAP

Appian

Dassault Systemes This has helped company to establish business with several Fortune 500 companies. Persistent is helping them build or adopt software platforms to launch new products and services. Given their increasing focus on enterprise business, they have also strengthened pre-sales, marketing and customer engagement functions. Company has adopted a model based on the 'fewer, bigger, bolder' strategy, with three major initiatives: (a) Building a world class account management process and team to support our ISV and enterprise named accounts and growth accounts; (b) Scaling up our platforms business (c) Enterprise Sales. The Enterprise Digital Transformation market is expected to be the fastest-growing technology spends over the next three to five years. Persistent has generated almost a quarter of their revenue from enterprise clients.

There is a three-tier leadership program.

The top tier comprises of current leaders,

Tier-two comprises of leaders who can assume leadership roles in the next 12 to 18 months

Tier-three comprises of future potential leaders.

Approximately 200+ leaders are being groomed for the future.


In each of the chosen verticals, they have been successful in delivering transformation solutions. In financial services, they have built a loan origination system to help a client originate a loan in half an hour. In healthcare, they are partnering with one of the states in the USA to build a statewide clinical research data on cloud, to enable states to take preventive measures. In media, Persistent developed a highly specialized recommendation engine for streaming video on cloud. In the high-tech sector, they built Software as a Service to facilitate usage of heuristic machining data for generating forecasting machining for similar parts. Their in-house product 'eMee', a gamification platform, has acquired its first client in the US market. Pi was designed as a mobile first intranet to deliver 'information to anyone, anywhere, on any device'. This path-breaking approach has won them many awards across the world. A high touch and high tech approach to training has helped build a continuous learning culture. People can learn in a classroom and on mobile devices seamlessly. Persistent was awarded the Best Corporate University last year. They have strengthened and expanded their global development centers for tapping local talent. Due to this fast pace of change, software is being built incrementally and iteratively in an agile manner. Persistent have partnered with global agile standards entities and have 440+ certified Agile experts to guide their client in this journey. This change requires a deep leadership pool and they have built a pool of future leaders.


Persistent Systems collaboration with IBM which is a significant and a

major player in this industry to pursue a combined Internet of Things

strategy and help customers develop solutions on the Watson IoT

Platform using the IoT Continuous Engineering solution has been

successful. The alliance combines IBM Watson IoT Platform with

Persistent Systems’ expertise around continuous engineering, analytics

and enterprise digital transformation. The advantages of the alliance

are:

IoT-generated data is growing twice as fast as social and computer-

generated data. It is extremely varied, noisy, time-sensitive and

often confidential. This complexity is increasing as billions of

devices interact in the world and test the limits of programmable

computing.

It is projected that IoT data will yield insights driving potential

economic value of as much as $11 trillion by 2025.

It is estimated that business-to-business (B2B) users can generate

nearly 70 percent of the potential value of the Internet of Things,

in large part through operational efficiency gains made possible by

initiatives such as smart factories and connected supply chains.

The Internet of Things enables informed decisions and, when

appropriate, automated actions; the benefits of these can be

passed through to consumers, enabling smart healthcare, intuitive

vehicles with safety features and connected, personalized home

and the possibilities are almost endless.

With sophisticated algorithms that are part of the Watson analytics

platform, customers will be able to optimize the performance of

these things in the context of millions of other objects (things) in

the field.

This revolution will improve the way they manufacture, distribute

and operate every system that is known to mankind.

This partnership combines IBM’s Watson

IoT capabilities with our expertise around

continuous engineering, analytics and

enterprise digital transformation.

Through this partnership they will build

and expand our 1,000+ engineers already

dedicated to developing various aspects

of the IBM platform to the Watson IOT

platform.

Persistent is working together with IBM to

closely engage with customers to help

drive their IOT vision.

Anand Deshpande, MD and CEO of

Persistent Systems said “The deal with

IBM contributed 8 percent to its revenue

in Q4 and he further expects it to increase

to 15-20 percent in fiscal year 2017”.

http://www.mckinsey.com/insights/business_technology/the_internet_of_things_the_value_of_digitizing_the_physical_world


Investment Rationale

Persistent’s tie up with IBM to jointly work on the Internet of

Things (IoT) platform, contributed 8% to its revenue in March

quarter and he further expects it to increase to 15-20% in fiscal

year 2017

Achieved 3,000+ product releases and reaches 350 global

clients in year 2015

Persistent has subsidiaries all over the world.

The Indian Information Technology (IT) sector is expected to

triple its current annual revenue to reach US$ 350 billion by FY 2025

and to grow 11 per cent per annum, as per NASSCOM.

By 2018 India’s internet economy is expected to touch Rs 10

trillion (US$ 151.6 billion) accounting for 5 per cent of the country’s

gross domestic product (GDP)

Profit Margins are consistent with more than 15% in last 7

years.

Consistent increase in turnover in last 7 years by more than

15% yoy.

Persistent is a cash rich company pays dividend every year.

Company maintains its operating profit margin from 15% to

20%

Retained earnings have increased from Rs. 53.34 to 155.93

almost 3 times since 2011.

Company has good market capitalization and average volume

is above 1lakh shares which suggest company has good market

liquidity i.e. easily tradable in market

FII holding and PE ratio of IT companies, were average PE

ratio of industry is 20 and stock is trading at par with industry PE

ratio. Company has a good FII holding of 22.10%.

We recommend BUY in Persistent Systems @ 745 with the Target of 940 as Persistent

showed highest deliverable quantity on 18th April for 1.38 Lakhs shares at 730-720 levels and

on 26th April 2016 for 1.90 Lakhs shares at 740-706 levels. This shows that company is

taking support at 706 to 720 levels.



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BUY Persistent Systems at Rs. 745 with a Target of …...Report By : Vikash Kandoi – [email protected]; Surbhi Lohia – [email protected] BUY Persistent Systems at