iGate may slash pay packets in Patni
Patni’s gross margins are far lower than that of iGate and a rationalisation of the average compensation would be necessary to avoid a stiff margin cannibalisation. iGate is likely to change the employee bulge in Patni, lowering the average experience levels, and assign more responsibility to employees with fat pay packets.
iGate announced it will acquire a majority stake in Patni Computer Systems on January 10, creating the Indian IT industry’s newest billion dollar baby. While iGate’s gross margins for the year ended December 31, 2010, was at 42.6%, Patni’s margins stood at 35%. Patni, one of the oldest Indian IT firms, currently has an average experience level of seven years compared to the younger iGate’s four years.
However, iGate may not explore salary cuts to achieve higher margins, a top executive said. Salary restructuring is a common practice in the event of a merger, especially in the US. “Patni’s salaries are more but so are their billing rates. You cannot reduce anyone’s salary. I don't think we will do that,” member of the board in iGate and CFO Sujit Sircar said. “There are two options – either go for salary cuts or increase domains or responsibility. We will do the second,” he added.
iGate, he noted, has successfully brought down the average experience levels in the company from six years a few years back to four years now.