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    Persistent Systems IPO rated 4/5 by CRISIL

    Synopsis

    CRISIL has assigned IPO Grade '4/5' to the initial public offer of Persistent Systems Ltd, which indicates that the fundamentals of the issue are above average.

    MUMBAI: CRISIL has assigned IPO Grade '4/5' to the initial public offer of Persistent Systems Ltd, which indicates that the fundamentals of the issue are above average, in relation to other listed equities in India.

    The grading reflects the company’s presence across the value chain of product development--product conceptualization, design, development, testing and support--its diversified client base, growing cash accruals coupled with the management’s proven execution capabilities. Apart from catering to leading independent software vendors (ISVs), Persistent offers end-to-end solutions to smaller software product companies.

    The company is focusing on augmenting its business through emerging technologies and new initiatives such as Cloud Computing/SaaS, Analytics, Enterprise Mobility and Enterprise Collaboration Services. Moreover, its R&D efforts have enabled Persistent Systems to further strengthen its domain capabilities, thereby executing projects across all stages of product development. The company also has a strong financial position given its zero gearing and generation of robust cash.

    The grading also factors in the sound technical background of promoters and the experienced second line of management. Corporate governance in the company is strong given the presence of eminent independent directors on its board over the last few years coupled with the adoption of high disclosure standards.

    Persistent is promoted by first generation entrepreneurs Dr Anand Deshpande and Mr S. P. Deshpande. The company has around 297 customers, of whom the top 10 customers account for around 37 per cent of its revenues. As of November 30, 2009, the company had around 4,400 people on its employment rolls.

    However, CRISIL’s grading is tempered by the company’s dependence on outsourced projects from developed markets, vulnerability of its revenues to currency fluctuations and wage inflation. The possible withdrawal of tax concessions post March 31, 2011 could adversely impact post tax profitability.

    The company's offshore development centres are located in Pune, Nagpur, Goa and Hyderabad. The company owns most of its development centres. Persistent plans to use a part of its IPO proceeds to fund the construction of two new development centres--one in Hinjewadi, Pune and other in Nagpur, with a capacity to seat 3,000 and 1,200 employees, respectively at an estimated cost of Rs 1,749 million. Around one-fifth of the IPO proceeds are estimated to be used for procuring hardware.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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