Mumbai: Mid-tier IT firm Persistent Systems on Monday reported a 20% drop in consolidated April-June net profit, hurt largely by higher tax expenses due to the expiry of the software technology parks of India (STPI) scheme.
Total expenditure, which jumped 26% to Rs198 crore, also weighed on profit.
Tax expenses shot up almost five-fold to Rs124.66 million as the company lost some tax benefits it used to enjoy under the STPI scheme.
The STPI scheme, which expired in March this year, was started in 1991 to boost software exports. Among other benefits, it provided a 10-year income tax exemption for units situated in software technology parks.
Small and mid-cap IT firms are lagging larger peers in moving to special economic zones (SEZ), where some tax benefits accrue. Moving to a SEZ will help companies mitigate the impact of the expiry of the STPI scheme to some extent.
“We are doing some activities in a special economic zone that has started out, but actual net movement of the business is marginal,” chairman and managing director Anand Deshpande told reporters on a conference call.
The tax rate for the quarter jumped to 31.3% from about 7.9-8% in FY11.
“We do expect to end the year with a tax rate of about 30%.”
Pune-based Persistent reported a April-June consolidated net profit of Rs275.68 million, compared with Rs345.28 million a year ago.
Revenue jumped 23.6% to Rs224 crore due to an overall growth in existing accounts.
The company’s billing rate inched up 1.6%, while volumes grew about 11% on a sequential basis, Deshpande said.
“Pricing is moving up, but it moves up very gradually,” he said.
Shares of the company, which the market values at $341.75 million, were down 1.59% at Rs374.10 in a choppy Mumbai stock market.