Debt settlement pulls iGate Q2 net profit down 90%; bullish on Europe

Written by Press Trust of India | New Delhi | Updated: Jul 17 2014, 03:48am hrs
IgateThe US-based firm had posted a net profit of USD 30 million in the second quarter of 2013. It follows January-December as fiscal year.
Hit by one-time charge of USD 51.8 million on debt settlement, outsourcing firm iGate today saw its net profit for the June quarter declining 89.6 per cent to USD 3.1 million.

The US-based firm had posted a net profit of USD 30 million in the second quarter of 2013. It follows January-December as fiscal year.

"For the loan of USD 770 million (at an interest rate of 9 per cent), we were paying USD 23-25 million per quarter in interest costs. Now, we have refinanced it and have taken a loan of USD 685 million at an interest of 4 per cent and will be paying USD 7-8 million per quarter in interest costs," iGate President and CEO Ashok Vemuri said.

This will reduce over USD 50 million in interest costs annually, he added.

iGate's net debt stood at USD 475 million at the end of the second quarter.

iGate's consolidated revenues rose 10 per cent to USD 311.7 million in the April-June 2014 quarter against USD 283.3 million in the same quarter last fiscal.

In the January-March quarter of 2014, iGate had reported a net income of USD 31.6 million and revenue of USD 302.2 million.

Vemuri said the markets are very strong and the company is optimistic about IT spending this year, especially in verticals like Banking, Financial Services and Insurance (BFSI), retail and Consumer Packaged Goods (CPG).

"Also, I am extremely bullish about Europe. It is where the large transformational deals will happen. We are focusing on Europe more and this in not just UK but other areas like Germany, Switzerland, Nordics and BeNeLux regions," he said.

He added that while North America has been the deal winner for the firm, the firm is now increasing its focus and investment on the European region.

On the quarters ahead, Vemuri said revenue growth is likely to be higher in the second half than H1 as large deals add to the company's revenue and margins.

"iGate has signed its largest deal ever in terms of deal value and total contract value, the benefits of which will accrue in the next few quarters. We have also signed two other large multi-year deals, which will all add value to the firm going ahead," he said.

In total, iGate added nine new clients including five Global 2000 companies during the second quarter.

"The focus has shifted from traditional business to a more digital and technology driven business. So pure-BPO and pure-ADM is dead. It is more productivised applications, more options, cost optimisation and at the same time, more value," Vemuri said.

As of June 30, 2014, the company had 32,742 employees with a net addition of 1,907 people.

Its utilisation rate was around 74 per cent, while its attrition rate stood at about 15.5 per cent for the quarter.

Vemuri said the company had given a wage hike of an average nine per cent for offsite employees and three per cent for onshore workforce.

He added that the firm has been able to maintain its margin levels despite the salary increase this quarter.

However, iGate is closely watching the forex headwinds with the appreciation of the rupee against the US Dollar.