Information technology services company iGATE Patni wants to become more selective about its deals. With the delisting of Patni Computer Services, which it acquired last year, from the Bombay Stock Exchange, the combined entity can now chase deals as a single company. Chief executive officer Phaneesh Murthy, in an interview with Piyali Mandal, discusses achievements of the combined entity and the trends. Edited excerpts:
Your Q1 revenue on a sequential basis is down.
There were delays in project kick-offs, which resulted in lesser revenue growth. Some 44 clients were giving us revenues to the tune of just $5 million. We have not renewed our contract with such clients. We expect our revenue growth to be back on track over the next couple of quarters. We will be selective about deals. Our focus would be on the client, rather than the deal size. So, if it’s a Global 500 client, and even if they are giving us a small deal, it makes business sense, as we know over the years it will yield benefits.
Has your scale helped you pitch for bigger clients?
Yes, one of the key highlights of this quarter is that we have been short-listed for two deals in the range of $100 mn in the BFSI (banking, financial services and insurance) segment. This shows our business outcomes-driven Integrated Technology and Operations (iTOPS) solutions are paying off. We have added seven clients during the quarter across North America, the US, West Asia and India.
Your interest costs on loans are very high; you have also taken fresh loan for delisting. Are you comfortable at this level? Any plans of restructuring the debt?
We have taken a $770-mn loan for five years and the interest costs on that is roughly $70 mn a year. So, that will continue. We are comfortable with that. We have also taken a loan of $265 mn for delisting. It will add another $9 mn per year on the interest cost. Once we are a single company, we will have $475 mn in cash. The first priority is to repay the $ 265-mn loan.
The combined entity has clocked almost 35 per cent profit growth. What worked in the company’s favour during the quarter?
EPS (earnings per share) was higher by 65 per cent over the last year. The profit was a result of prudent financial management. Also, we have saved some money on the SG&A (selling, general & administrative expenses) cost. We decided we would invest the marketing budget after delisting Patni. The amount will be invested now to promote the combined entity. The long tail rationalisation of our customers that we undertook yielded us higher profits but dipped revenues.
What appraisal can your employees can expect?
We have announced a 10 per cent hike across the board. The increment was effective from April 1.
Your bigger peer, Infosys, has given a lacklustre guidance. What outlook would you like to give?
We expect to grow two-three per cent quarter-on-quarter. Annually for 2012, we have given a guidance of eight to 10 per cent growth.