Despite strong pipeline, IGATE to go slow on hiring

IGATE, the Nasdaq-listed information technology services company, on Wednesday reported good earnings for the quarter ended September, exuding confidence the large deals it won in the past year, as well as a strong pipeline, would help it end the year on a strong note. However, it sounded caution on its hiring outlook, saying this would "moderate" due to the company's focus on automation and its productivity enhancement drive.

For the September quarter, the company reported 16.92 per cent year-on-year growth in net profit, at $37.3 million. Due to strong growth in volume (billable man hours), revenue rose 10 per cent annually. The company said volume growth during the quarter stood at an all-time high of 3.8 per cent.

On a sequential basis, revenue rose 3.5 per cent. For the quarter ended June, IGATE had recorded a net profit of $3.1 million, following a one-time debt refinancing charge of $51.8 million.

EYE ON THE GATE

• 16.9% Growth in net profit at $37.3 million
   
• 10% Rise in revenue
   
• 3.8% Volume growth during the quarter, an all time high
   
• $550 million Total contract value of large technology deals during the past one year

The company said during the September quarter, it had signed a deal with a total contract value (TCV) of about $150 million with a client in North America. In the past year, it had signed technology deals with a TCV of $550 million, it added.

"I am pleased to say a couple of new large deals have entered into the pipeline, though these are in early stages," said president and chief executive Ashok Vemuri. He added the company's major markets, including North America and Europe, were showing strong growth momentum. "Unlike previous years, this year we are seeing clients are sticking to budgets," he said.

The company lowered debt by $126 million during the quarter. With this, net debt stood at $448 million, said Sujit Sircar, chief financial officer.

"Though we experienced some margin headwinds due to continuing investments in some transformational client engagements and expanded client coverage and hiring for growth, we posted an increase in net income," he said.

The company's operating margin declined by 120 basis points to 21.3 per cent, largely because it hired about 10,000 people in the past year, against the planned 6,000. During the September quarter, it net-hired 1,713 people; with this, its overall staff strength stands at 34,455.

"Our long-term goal is to have an operating margin of 25 per cent," Vemuri said.

The company said it was setting up a dedicated strategic sales team to look at large transformational deals. The team will be headed by executive vice-president Derek Kemp.

IGATE has appointed Srikanth Iyengar as senior vice-president, head of European and Australian operations and member of the executive council. Earlier, Iyengar headed Infosys's financial services segment in Europe.