iGate net jumps 110%, but top line shows flat growth

Information technology services company iGate on Thursday reported a 110 per cent jump in net profit in its fourth quarter (October-December), aided by a fall in income tax expenses after the delisting of Patni from Indian bourses. However, the topline growth was quite sluggish on fewer client additions in the quarter.

In its fourth quarter ended December 31, the Nasdaq-listed company, which has a significant delivery presence in India, reported a net profit of $32.2 million against $15.3 million in the year-ago period. The revenues at $271.6 million saw a marginal increase of one per cent compared with the corresponding quarter last year.

Compared with the previous quarter, net profit went up 14 per cent, whereas the revenue growth was flat compared with a revenue of $271.1 million in the third quarter of 2012.

The company added 14 clients during the year, 11 from North America. For the full year, the net profit went up 88 per cent to $97.2 million and the revenues increased 37.8 per cent to $1073.9 million over 2011. “2012 was a year of corporate restructuring where the focus lay on building the right engine for growth which has slowed our revenue growth,” said Phaneesh Murthy, CEO.

He said the company streamlined the customer portfolio in 2012.

And reworked the sales force to sell sophisticated outcome-based solutions. instead of just selling staffing solutions.

“We expect our efforts to show results in 2013,” he added.

The year 2012 was good for iGate from cash generation point of view when the company generated operating cash flow of about $100 million after payment towards the interests on loans and debt lying in its book. The company has a total debt of about $1.1 billion including $770 million which it raised via high-yield bonds for which it is required to pay roughly about 70 million towards interests every year.

Murthy said in 2013, even though the clients’ budgets are expected to be flat in 2013, spending is expected to go up with the improvement in the business sentiment.

“I believe that in 2012, the client spending was not in line with their budgets, while in 2013, I expect the spending to be much in line with the budgets. This is where I expect growth to come from,” he added.

Just-in-time Hiring
The company said its hiring plan for 2013 will be based on business demand. “We would prefer just-in-time hiring in 2013 based on the market demands,” said Srinivas Kandula, EVP and Global Head of HR.

In 1012, the company hired about 1021 employees which took its headcount to 27,554.