Dr. Anand Deshpande, Founder, Chairman and Managing Director, Persistent Systems Ltd., earned a Bachelor's Degree (Hons.) in Technology in Computer Science and Engineering from the Indian Institute of Technology, Kharagpur in 1984. He also earned a Doctorate in Computer Science from the Indiana University, Bloomington, Indiana (USA) in 1989.He worked at Hewlett-Packard Laboratories as a Member of the technical staff in Palo Alto, California from 1989 to 1990 and has been a member of our Board since he founded our Company in 1990. He is a member of the Association for Computing Machinery (ACM), Institute of Electrical and Electronics Engineers (IEEE), Computer Society of India (CSI) and the Young Presidents' Organisation (YPO). He currently serves on the executive committee of the National Association of Software and Services Companies (NASSCOM) and Maharashtra Chamber of Commerce Industries and Agriculture (MCCIA).
Persistent Systems Ltd. Established in 1990, Persistent Systems is recognized as an award-winning technology company specializing in software product development services. Persistent currently conducts business at various locations in India including in Pune, Nagpur, Hyderabad and Goa and overseas in Canada, Japan, Germany, The Netherlands and UK. The Company also has business presence through its subsidiaries in US and Singapore. With 4,400+ employees as of November 30, 2009, innovative business models, and reusable assets and frameworks, Persistent aims to help its customers increase revenues and margins, and enhance brand value. It has developed proven processes for the entire product lifecycle and has contributed to over 3,000+ software product releases in their last five years and has 297+ customers as of Fiscal 2009.
Replying to Yash Ved of India Infoline, Dr. Anand Deshpande says "We have pursued and may continue to pursue strategic acquisition opportunities to enhance our capabilities."
Brief us about your IPO plans? When do you expect to hit the markets?
Persistent Systems Ltd., a market leader in outsourced software product development services, is tapping the capital market on March 17, with an Initial Public Offering (IPO) of 5,419,706 equity shares of Rs. 10 each for cash at a price (including a share premium) to be decided through a 100% book-building process.
The Bid/ Issue will close on March 19. The Price Band has been fixed between Rs. 290 and Rs. 310 per Equity Share.
This Issue has been graded by CRISIL as 4 on 5, indicating above average fundamentals.
The Equity Shares offered through the Red Herring Prospectus are proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange.
The Issue comprises a Net Issue to the public of 4,877,730 shares of Rs. 10 each (the "Net Issue") and a reservation of up to 541,976 equity shares of Rs. 10 each for eligible employees (the "Employee Reservation Portion").
The issue proceeds are proposed to be used for expanding development facilities at Pune and Nagpur, investing in hardware and software infrastructure and capitalizing our subsidiaries for setting up development facilities in SEZ unit through such subsidiaries apart from general corporate purpose.
The company had planned a listing in 2008 but shelved it due to poor market conditions. So, is there any change in the size or the pricing of the IPO this time around?
We had decided to defer due to the volatile market conditions then. There has been a change in the number of equity shares being offered which has increased from 4.97 million equity shares (2007) to 5.42 million equity shares (2009).
Is any of the existing shareholders/investors selling in the IPO? What will be the overall dilution of equity in the IPO? What will be the promoters’ stake after the IPO?
The Issue consists of a Fresh Issue of 4,139,000 equity shares and an Offer for Sale of 1,280,706 equity shares by Dr. Shridhar Bhalchandra Shukla and Vijayalaxmi Shridhar Shukla (holding shares jointly) and Ashutosh Vinayak Joshi (collectively known as "the Selling Shareholders").
The Issue will constitute 13.55% of the fully diluted post issue paid-up capital of the Company and the Net Issue will constitute 12.19% of the fully diluted post issue paid-up capital of the Company.
And after the completion of the Issue, subject to full subscription of the Issue, our Promoters and Promoter Group will control, directly or indirectly, approximately 38.83% of our outstanding Equity Shares.
You are a unique IT company. So, tell us about the opportunity in outsourced software product development? What is the size of this opportunity? What is the growth rate?
Outsourced software product development (OPD), is an emerging category in the outsourced software industry. OPD companies take responsibility of building products for their customers. The software product development industry is large.
The aggregate of revenues of software product companies is in hundreds of billions of dollars. Software products are the key building blocks for system integration and application development.
US companies dominate the software products market. Outsourcing and off-shoring trends observed in the software industry are in-line with other similar trends in other mature industries. For example, through effective outsourcing, automobile manufacturers are assembling sophisticated components and assemblies designed and developed by outsourced partners, this has helped them reduce time to market and bring a large number of different models to the market.
We believe that we are one of the market leaders in outsourced software product development services. We are an OPD specialty company, offering our customers the benefits of offshore delivery. We design, develop and maintain software systems and solutions, create new applications and enhance the functionality of our customers’ existing software products. We deliver services across all stages of the product life-cycle, which enables us to work with a wide-range of customers and allows us to develop, enhance and deploy our customers’ software products.
What are your strengths and USP in this particular space?
Our Strengths:
- OPD specialty with deep-rooted product development culture
- Full product development services
- Long-term relationships with customers
- Investment in new technology areas
- Track record of well established sophisticated processes
- Strong team of highly skilled professionals and management
Our Value Proposition to our Customers: We recognize the specific needs of our customers across different stages of product maturity, and the interplay between our service offerings and these needs has enabled us to:
Reduce time-to-market: Our service expertise and technological expertise allows us to accelerate the development process. We have invested in a suite of time-to-market accelerators and continue to innovate in this area.
Reduce risk of engineering failure: We have a well-documented engineering track record. Over the past five years we have participated in more than 3,000 product releases and we understand the challenges of shipping products successfully.
Improve predictability and reliability of the engineering process: Our software development methods enable us to respond quickly to needs and requests from our customers; cutting down waste and waiting periods, while simultaneously increasing productivity
Reduce over-all PE costs: Our offshore engineering provides us an inherent cost advantage for engineering talent.
What will be your focus area in the coming 2-3 years?
We regularly invest in new technologies and track new business trends. We have aligned our existing areas of expertise and have created focused initiatives aligned with market needs.
These initiatives are:
- Cloud computing
- Analytics
- Enterprise mobility
- Enterprise collaboration
Are you planning any acquisitions?
We have pursued and may continue to pursue strategic acquisition opportunities to enhance our capabilities and address gaps in industry expertise, technical expertise and geographic coverage.
Recently in October 2009, we acquired PaxPro, an enterprise brand and packaging management software business, from Paxonix Inc. We continue to explore opportunities for partnerships, acquisitions or joint ventures or alliances that expand our product portfolio, build on our existing system capabilities, or give us a presence in complementary markets. We pursue strategic acquisitions and other inorganic initiatives that will strengthen our competitive position as well as drive profitable revenue growth.
Brief us about your international operations and expansion plans there?
We have a good presence overseas. We have 9 offices in the United States, 3 in Canada; offices in Europe in the UK, the Netherlands and Germany and in Asia in Singapore and in Japan, where we operate through a partner
Which are the verticals and business areas you are banking on to drive future growth?
We understand and actively track the industry trends, technologies, and markets that drive our customer’s businesses, and have strong domain capabilities across our service offering. We have specific focus in telecommunications, life sciences and infrastructure and systems.
Tell us about the innovations that the company has undertaken in developing products for your clients?
It is only through innovation that we can co-create value for our customers, which further helps them in creating value through their services. We continue to focus on three main areas of innovation: platform innovation, PE process innovation and domain specific innovation. Our efforts have resulted in the development of value-added products and services including time-to-market accelerators, connectors and integration services and other technology-based components.
We are innovators and help our customers to build innovative solutions. This was recognized when we won the 2008 NASSCOM Innovation Award in the Market Facing - Business Process and Business Model category. NASSCOM has recognized Persistent’s innovative mobile strategy, developed for Bridgestone, Europe - world’s largest tire manufacturer. As an OPD specialist, we believe that innovation is an integral part of the business model.
What are your recruitment plans? What is the attrition level on a 12-month basis?
We have a large pool of highly skilled, well-trained employees. We recruit talent from premier universities, colleges and institutes in India, including the Indian Institutes of Technology (IITs), Regional Engineering Colleges (RECs), leading engineering colleges across India, specifically in areas where our offices are located, as well as from some of the leading IT companies in India and overseas.
Our rigorous selection process includes technical tests, programming tasks and interviews. We have a similarly competitive recruitment program for our lateral hires. All new hires are inducted into our organization through a structured program, which involves extensive training as well as mentoring.
Our attrition for Fiscal 2009 was 13.57% and as of November 30, 2009 our employee strength is 4400+.
What is your message to your shareholders?
We believe that we are one of the market leaders in outsourced software product development services. We are an OPD specialty company, offering our customers the benefits of offshore delivery. We believe that we are well placed to retain our position in the OPD market segment due to our competitive strengths.
Our work with software product companies over the last 18 years has given us an inside view on how some of the leading software products are built. Over the past five years, we have contributed to more than 3,000 product releases for our customers. We have been recognized as one of the leading technology companies in the Deloitte Touche Tohmatsu Technology Fast 500 Asia Pacific 2009.