Apax confident iGATE will survive Murthy-gate turmoil

PE fund Apax Partners, which has sunk in over $350 million in iGATE, says it is confident that the IT services firm will undergo "seamless" transition following the exit of Phaneesh Murthy and achieve its long-term goals.

 

IGATE, which saw its shares fall over 10% since Murthy was sacked by iGATE on May 20 amid allegations of sexual harassment, had entered into a pact with Apax for part- financing over $1.2 billion buyout of a larger rival Patni Computer Systems in 2011.

 

With Murthy -- the company's visible face and driver of strategy -- gone, analysts have questioned iGATE's business prospects but Apax Partners said it is confident of the mid-sized IT firm's prospects.

 

"Apax has long-standing relationships with the iGATE Corporation and has every confidence in the company's ability to achieve its strategic long term goals," Sarah Rajani, Head of Communications, Apax Partners told PTI.

 

Post-Patni acquisition, iGATE had articulated plans to have five-year Ebitda (Earnings Before Interest, Taxes, Depreciation and Amortisation) of $400 million by 2015-16. Presently, that number is around $250 million.

 

The appointment of Gerhard Watzinger as President and CEO on an interim basis, working closely with iGate's co-founders Sunil Wadhwani and Ashok Trivedi, will collectively ensure the company undergoes a seamless transition during this period, the Apax spokeswoman added.

 

When contacted, a iGATE said: "Our shareholder base is stable between the two co-founders and Apax, our major investor, these three shareholders hold significant majority of the shares outstanding.

 

"iGATE has a clear strategy that has put us in a strong position and it is a top priority of our management team to continue with our plans."

 

However, analysts feel it could take sometime before iGATE regains business momentum.

 

"We suspect the CEO search could take several months to complete. Given Phaneesh Murthy's significant involvement in strategic direction, Patni integration, and sales efforts, we suspect he will not easily be replaced. We also are concerned about Murthy's importance to iGATE's key customer relationships," US brokerage Oppenheimer & Co Inc has said in a report.

 

Watzinger, 52, is a successful 29-year IT industry veteran, who previously served as an executive at iGATE from 1998 to 2003 in a number of roles, including CEO of the iGATE Solutions business (formerly Mascot Systems).