IGATE net drops 89.6% to $3.1 million

IGATE on Wednesday reported a 89.6 per cent decline in its net profit to $3.1 million for the quarter ended June, as compared to the corresponding period last year.

The Nasdaq-listed information technology services company was hit by a one-time charge, related to a debt settlement aimed at reducing its interest burden.

The US-headquartered company saw its consolidated revenue rising 10 per cent to $311.7 million on a year-on-year basis, backed by deal wins. This included the “largest deal ever in its history”, the real benefit of which will start flowing in the coming quarters, it said.

On a sequential quarter basis, the net profit declined 90 per cent and revenue went up 3.2 per cent. During the quarter, IGATE booked a one-time refinancing charge of $51.8 mn, as the company retired debt to the tune of $685 mn. It now has a total debt of $475 mn on its books. This refinancing will help IGATE reduce its interest cost to around $7-8 mn a quarter, as against $23-25 mn earlier.

In terms of profit margin, the company saw some pressure, which it attributed to a pay rise in the quarter. The operating margin was 22.5 per cent, a drop of 240 basis points over the previous quarter.  With effect from April 1,  has given a nine per cent pay rise to its offshore employees and three per cent to onshore ones.

Ashok Vemuri, president and chief executive, said the company was expecting to grow higher in the second half of the year than the first two quarters. “Our deal pipeline is extremely healthy. The success of our industry utility platform and our positioning in large deals, including the recently announced one, gives us the confidence that our structure, value proposition, client engagement and relevancy are tracking well,” he said.

The company added nine clients including, five Global 2000 ones. Vemuri said the company was hopeful of winning two more ‘large contracts’, similar to the one they bagged in the quarter, in the coming months.

As of June 30, the company had 32,742 employees, with a net addition of 1,907 people.