‘Persistence' pays off as India gets a new ninth-largest IT company

Mint

30-04-2025

Persistent Systems
Ltd got more revenue than Hexaware Technologies Ltd in the January-March 2025 period, making it the country's ninth-largest information technology (IT) services company. This marks the fourth instance of a change in the pecking order of the country's $283 billion IT industry in a year.
The big four—Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and
Wipro
Ltd—accounted for 26% of the country's IT industry. Tech Mahindra Ltd and LTIMindtree Ltd are the fifth and sixth-largest IT outsourcers, followed by
Mphasis
Ltd and
Coforge
Ltd.
For the three months ended March 2025, Persistent Systems recorded a 4.16% jump in revenue to $375.2 billion. During this time, Hexaware, relisted on the stock exchanges in February, saw its revenue shrink 0.21% sequentially to $371.5 million.
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For now, Persistent gets bragging rights among investors, shareholders and clients for going up a notch, but this is not the first time there has been a shuffle at the top.
Since HCLTech overtook Wipro as the country's third-largest IT outsourcer in 2018, there has hardly been another change in the revenue ranks. But something appears to have changed in the last eight months.
Infosys briefly overtook Cognizant Technology Solutions Corp as the country's second-largest IT services company in October, only for the Nasdaq-listed company to reclaim its lead less than a fortnight later.
Cognizant is considered an Indian-heritage IT firm as more than three-fourths of its workforce is stationed in India. To be sure, Hexaware and Cognizant follow the calendar year for accounting purposes, while the remaining homegrown IT services firms follow the April-March financial calendar.
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Then came the shuffle in the middle between companies earning between $1 billion and $1.5 billion in annual revenue.
Coforge overtook Persistent Systems in October to become the country's ninth-largest IT services company. Three months later, it overtook Hexaware to become the country's eighth-largest IT services company, after reporting $397 million in revenue for the December quarter.
The company's revenue got a big boost from its biggest acquisition in May last year, that of Hyderabad-based
Cigniti Technologies
, an AI & IP-led digital assurance and engineering services company. Coforge shelled out $220 million for a 54% stake in the company.
Christmas bore fruit even for
Sonata Software
Ltd, which overtook L&T Technology Services as the country's 11th-largest IT services company. While Sonata ended December with $336.8 million in revenue, up 30% sequentially, LTTS ended 2024 with $312 million, up 1.7% sequentially.
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There is a tug-of-war between the country's IT mid-cap companies as they are scrapping for every dollar. As of March, the country's seventh-largest and twelfth-largest IT outsourcers are separated by only $85 million.
An analyst attributed the rejig in the Indian IT to the neck-and-neck positioning of the mid-caps.
'There is more shuffle amongst the mid-caps as compared with the large-caps because the former are very close to each other in terms of revenue. If any of the mid-cap companies probably bag a big deal, then that also can make a difference in the quarterly revenues," said Abhishek Kumar, equity research analyst for
JM Financial
.
Mphasis, Hexaware Technologies, Persistent Systems and LTTS ended January-March 2025 with $430.4 million, $371.5 million, $375.2 million and $345.1 million, respectively. Coforge and Sonata Software are yet to declare their fourth-quarter results.
The spotlight is now on the latest rejig in the order of India's largest IT outsourcers.
Persistent Systems was founded in 1990 by Anand Deshpande, a former Hewlett-Packard employee. Intel Capital, the investment arm of chip-maker Intel, invested $1 million in 2000, and the company was listed on the stock exchanges in 2010. Almost a third, or 29.35%, of its shares are owned by promoter Deshpande, whereas public shareholders own about 68.5% of the company.
The company grew the fastest among its peers between March 2022 and March 2024, with a compounded annual growth rate of 24.46%.
'PSYS' (Persistent Systems) unique value proposition and its strong play around regulated verticals are keeping it more resilient in this adverse environment," said PL Capital analysts Pritesh Thakkar and Sujay Chavan in a note on 24 April, after Persistent Systems announced its full-year results. 'Additionally, the investments around hiring senior leadership team within key verticals have been instrumental in fuelling client mining/hunting activities and closing large strategic deals."
Meanwhile, Navi Mumbai-based Hexaware Technologies Ltd, which was relisted on the stock exchanges in February, has raised question marks. Its quarterly revenue has declined for two straight quarters, starting in September 2024. Its second consecutive quarter of revenue decline meant it lost its place to Persistent.
Atul Nishar incorporated Hexaware as
Aptech
Information Systems Ltd in November 1992. Five years later, Aptech Information Systems was listed on the country's stock exchanges, before it was rebranded as Hexaware Technologies Ltd in 2002. It traded on the stock exchanges for another 18 years before delisting in 2020, the same year Happiest Minds listed.
US-based Carlyle Group Inc. acquired 95.51% of the company in 2021 through its investment holding company, CA Magnum Holdings, for $3 billion.
The company still has not fared better than its peer, Persistent, in the last two quarters.
In terms of profitability, Persistent did better. Its profitability jumped 160 basis points to 15.6% at the end of the three months through March 2025, while Hexaware's operating margins widened 60 basis points to 14.3%.
Persistent also enjoys a bigger market share. Its market cap of
₹
841.9 billion is almost double that of Hexaware's
₹
442.7 billion.
Key takeaways