iGate posts strong profit in June quarter

Net profit grows 136%; Company says CEO search is on

IT services firm iGate Corporation posted a 136% jump in its net profit at $30 million for the quarter ended June 30, 2013 against the same quarter last year. The company's revenues rose by 6% on a year-on-year basis to $283.3 million and by 3% sequentially, on the back of new order wins and uptick in the business environment.

The net profit includes $3 million derived from the cancellation of stock options issued to the company's former CEO Phaneesh Murthy.

In June this year, the Nasdaq-listed company had asked Murthy to leave after the company discovered that he had concealed information about a relationship with a colleague, going against the company policy. Sunil Wadhwani, co-founder and co-chairman of the company said on Wednesday that the process to search for a new CEO is on and the “aim is to have a new CEO by fall (of winter).”

In a statement, iGate’s interim CEO Gerhard Watzinger said that the company has booked orders worth over $600 million including three significant multi-year contracts each valued at $100 million or greater. “The company is seeing more positive signs related to offshore IT services spending and stability in the overall business environment, with clients spending to their budgets,” he said.  

Watzinger added that the company’s growth has been broad-based during the last quarter. For the next quarter, IGate is looking at a sequential growth of at least 2%. “We are seeing much more willingness from clients to spend the money they had earlier budgeted for,” he added during a call with analysts on Wednesday.

The company’s gross margins stood at 37.9%. It also lost $1.3 million due to forex losses. “I am happy with the margin growth seen in the quarter as we absorbed our annual wage hikes which were offset largely by operational efficiencies and to an extent the depreciation of the Indian Rupee,” said Sujit Sircar, CFO of iGate.

Sircar said the tailwinds provided by the rupee fluctuation against the US dollar appear to be short-lived with the operating costs going up in the medium to long term.

The company added 11 new customers during the quarter, of which two were Fortune 1,000 companies. The management also said that it plans to hire 500-600 net employees over the next few quarters.