iGate Q1 Net declines 9%; April-June margins may face pressure

Outsourcing services firm iGate today reported a 9 per cent fall in net profit for the first quarter ended March 31, 2014 due to currency fluctuations, visa fee and also as it rationalises its client structure.
The New Jersey-headquartered firm's net profit stood at USD 31.6 million for the January-March quarter of 2014 fiscal against USD 34.8 million in the year-ago period. IGate follows January-December as fiscal year.
IGate, however, posted a 10 per cent growth in income at USD 302.2 million in the reported period, against USD 274.9 million in the January-March 2013 quarter helped by growth in North America and Europe.

North America accounts for 77 per cent of the revenues followed by Europe at 16.5 per cent and the remaining from rest of the world.
Margins of the NASDAQ-listed firm may face under pressure in the April-June quarter this fiscal as it plans to complete the rationalisation of its strategic client base, continue its hiring activities and also due to the scheduled wage hikes.
Upbeat on the growth in Europe, iGate President and CEO Ashok Vemuri said: "Europe is seeing a good traction in the traditional IT spending space as well as in retail, automobile and Hi-Tech among others. However, Western Europe still seems to be not out of the woods."

When asked about the firm's plans for Europe, Vemuri told PTI: "Going ahead the firm is concentrating on the UK, Nordic countries and Germany. We may even go for a small acquisition in these geographies, especially Germany.

"Our consideration for acquisition is either to acquire some capability for example in digital, analytics or mobility space and the other is the European aspect where we need to build a certain capability in some geography."
Earlier speaking to reporters in a conference call, Vemuri said iGate will give wage hike to its employees in the April-June quarter -- 8-10 per cent in India and 2-4 per cent at other places -- which will have an impact on the firm's margins.

Besides, the firm is in the process of weaning away from non-strategic clients. During the first quarter iGate closed down 16 such accounts.
"We have completed about 80 per cent of tail programme management and the rest will be achieved as we go forward," Vemuri said.
The company added nine new customers during the first quarter, which included seven from North America and two in Europe.
Segment-wise, two deals came from the BFSI segment, retail & CPG, healthcare & life sciences and Manufacturing, each, while one deal was secured in the services segment.
IGate's headcount grew by 1,102 people to 30,835 at the end of March 31, 2014 and the firm expects to continue hiring as it anticipates to meet demand for deals going ahead.

The company successfully secured financing to redeem its USD 770 million 9 per cent Senior Notes through a combination USD 325 million of new 4.75 per cent senior notes due in 2019 and bank financing.