iGate has finally completed the acquisition of Patni Computer Systems, one of the biggest transactions in the information technology (IT) services space so far. Phaneesh Murthy, who would take over as the CEO and MD of the combined entity iGate Patni, is all set to compete with the likes of IBM, Accenture, Infosys and Congnizant and has given two years' time for the company to hit the road on full speed. In a chat with Bibhu Ranjan Mishra and Shivani Shinde, he talks about the road ahead. Edited excerpts:
People say you wanted all your senior executives, which is why most senior executives from Patni had to quit. What's your reaction?
Our new executive council is a fairly balanced team. Of the nine in the council, four are from Patni and five from iGate. In any integration, you have to absorb the best of both first. I have no doubt that the present iGate team played a seminal role in bringing the company to this level.
Of the top executives of Patni, only four were retained while 12 others were allowed to go. What were the selection parameters?
I think those who were performing well and those who were doing something which contributed to the future of the parent company and the new one, were retained. We considered their capabilities, strength and commitment. We retained those who we think are aligned to our vision and can contribute to it.
What will be the total severance cost to the company?
There will be big severance packages. For instance, in case of Jeya Kumar, the former Patni CEO, we will give a year's salary and stock options. To give an exact amount is difficult as each person in Patni has a different contract, and we will honour all of them. It includes cash and non-cash components. The non-cash component is actually a bigger chunk, but that does not impact the company. The cash part of the severance packages will be a few million dollars.
How do you see the combined entity growing over the next few years?
I think we will reach all our goals in the next two years. This includes reaching 40-41 per cent in growth margins and 25 per cent in Ebitda (earning before interest, taxes deduction and amortisation. Some of the levers to achieve these are internal like increasing our utilisation from the current low 70 per cent to the higher side of 70 and to 80 per cent. At present, 55 per cent of the work is done on a non-time and material basis. As we increase this we will have more levers to increase our margins.
Now that the front-end is aligned, how long will it take to align the back-end and delivery of both the companies?
After aligning the front-end, we will slowly move to the shared services which won’t take much time as it involves about 800-1,000 people. The integration of delivery is a challenge as about 24,000 people are in this layer. We expect this to conclude in the next 12-24 months.
Will there be a rationalisation of workforce or infrastructure?
We don’t intend to do a rationalisation of the workforce. But, over the next two to three quarters, we will rationalise our infrastructure. At the Bangalore iGate campus, we are accommodating Patni employees from those who are now located in their Electronic City office. We will give up the Electronic City office. Similarly, at the Patni campus in Noida we are accommodating the iGate people. In the US, too, we have started to consolidate office. Over the next two or three years we will witness the benefits.
You do plan to delist Patni from the Indian bourses?
It does not make sense to keep two firms listed. We prefer to have a US primary listing and an Indian depository receipts (IDRs). But there are several hurdles. In this scenario, we will need to buy out the minority shareholders. For which, we will need $240 - $260 million. We will look at this only in the next 12-18 months.
You had said the acquisition was to get into the $1 billion club that will give you access to certain deals. Has that started to pan out?
I believe the customer confidence level has gone up. I am starting the process of getting a CIO Advisory meet organised by the end of this month. This will have participation from more than 20 CIOs of top clients. I want the CIOs from both the companies to come together and see what we have on offer and talk about strategy. Besides, we have some good relation with CIOs in the pharma and life science segment, but we did not have solutions catering to them. But Patni has a good life science practice. We have already signed two clients.
