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IT services company iGate is bracing for an organisational restructuring, wherein the company would move away from its current ‘functional organisation’ structure to a vertical-led structure based on industries and geographies.
The new structure for which the work is currently underway would take a few weeks to get finalised, Ashok Vemuri, the newly-appointed president and CEO of the Nasdaq-listed said on Monday.
As a part of the overhaul, the company would have a verticalised structure in the key market North America, which accounts for around 80% of its overall revenues. In North America, the company would now have verticals based on business segments, such as, banking, financial services, insurance, manufacturing and retail.
Geographies outside of North America including Europe, however, would operate without business-verticals due to the small scale of operations in those regions.
Each vertical in North America and geographies outside of the region will have their separate heads, and also their own delivery, consulting and sales functions, Vemuri said in his first interaction with the Indian media since his appointment in September this year.
“These business heads have been selected after a fairly stringent round of discussions based on their performance, capabilities and potential. They will be true business heads who will run their own P&L (profit and loss accounts), they will have delivery, consulting and sales all rolled into one single vertical,” Vemuri said over a video conference from New Jersey
“What we intend to do is provide our leaders with standalone budgets, standalone delivery and resources, and provide them with the opportunity to make investments so that they can have the responsibility and accountability,” he added.
Vemuri, a former board member and head of Americas, manufacturing and engineering services business at India’s second largest information technology (IT) services firm, Infosys, had joined iGate in September this year.
Calling this the ‘most appropriate’ time to undertake the organisational overhaul, Vemuri said, the company had been thinking about the move for some time and had already prepared a skeletal structure and “all that was needed to do was to bell the cat”.
“We have spent enough time in finding the leadership, creating an eco system which will allow us to leverage,” Vemuri said. “It is going to be disruptive for a certain period of time as we build those competencies, but it is not going to be disruptive to our core business. The return from this is going to be much larger than what we would get if we stayed where we are,” he added.
Vemuri refrained from announcing names of these new leaders for verticals and geographies, stating that it would still take a couple of weeks before the company nails down the final structure.
Even as some media reports had linked Vemuri’s appointment at iGate as a potential reason for some exits from the company over the past two months, Vemuri said the exits were triggered because of the organisational overhaul.
“People have left because they found themselves out of place in the new organisational structure, they did not find themselves with capabilities to function in the new structure. Some others left because of personal reasons,” he said.
Additionally Vemuri said, like his former employer Infosys, iGate would look at creating capacities for training employees and focus on capability building.
iGate is in the process of setting up a global training campus at Pune, which is likely to become operational from mid-2014. The company is looking at increasing its recruitment costs and will also be open to bring top talents from the industry.
Meanwhile, the company said it is exiting from certain markets such as Latin America, South Africa and the Middle East where the company had a very small presence. "Actually we never entered these markets; we were there half-heartedly," Vemuri said.
iGate to refinance a part of its high-interest loans
Company plans to raise $360 mn in secure term loan with lower interest rates
iGate on Monday said that it has signed an agreement to raise secured term loans to the tune of $360 million which it would use to refinance part of the existing loan it had incurred to acquire Patni Computer Systems.
The company said the credit facility which would have an interest rate of around 3% in an average, would help it to services a part of the high interest loans.
According to Ashok Vemuri, the president and CEO of the company, the company presently has a loan burden of $770 million with an interest rate of around 9% in an average. With the refinancing, the company would be able to save around $21.6 million per annum which it would have additionally spent towards servicing the higher interest loans.
“We are happy to announce the signing of the credit agreement which we expect to lower our financial leverage and create shareholders value by refinancing the indebtness under Senior Notes and Existing Credit Facilities Agreements. We expect this would result in significant interest savings in the years to come,” he said.
To facilitate the term loans, Pan-Asia iGate Solutions, a fully-owned subsidiary of the company has entered into a credit agreement for a secure term-loan facility with DBS Bank and ING Bank N.V, Singapore.
The credit facility will be two components -- a commitment of $270 million with an effective interest rate of around 3.5% and a commitment of $90 million which an effective interest rate of around 2.25%.
