iGate could suffer as Murthy exit puts strain on client acquisitions

Written by Debojyoti Ghosh | Debojyoti Ghosh | P P Thimmaya | Bangalore | Updated: May 23 2013, 06:17am hrs
iGate chief executive Phaneesh Murthys exit from the company has placed the promising IT major under a cloud with regard to its future, considering that the man in question was its strategic decision maker who was busy putting together a business model that he claimed would threaten other Indian IT vendors.

iGate, a US company with significant presence in India, has appointed Gerhard Watzinger as the interim head with the search on for a full time executive. The task before the new CEO would be very challenging as the company would have to address many concerns ranging from corporate reputation, customer acquisition and stock market performance, according to analysts and industry observers.

In a response to an email query from FE on the new CEO, an iGate spokesperson said, A search committee within the board of directors has been created, which will oversee the process for the identification and selection of a new president and CEO. The committee has been charged with selecting an experienced industry veteran to take over as the permanent president and CEO and drive long-term growth for iGate.

However, the ride ahead could be bumpy for iGate. Pradeep Mukherji, president and managing partner, Avasant, a offshore advisory firm, said, For the last few years, the company has not been doing well and the merger with Patni was not a great success. In the next few months, if it does not get its act together, it might become a candidate for takeover.

Now, with the departure of Murthy who was instrumental in driving iGates outcome-based pricing model, the company faces a tough task of hunting for new customers. An analyst who did not wish to be identified said, Murthys exit will impact the company when they go for new customer acquisition as he was the face of the firm.

Murthy had built an image of being larger than life with the avowed aim of taking on the big boys of the Indian IT industry. This has possibly made the task of finding a new successor a bigger challenge for iGate. Last year, iGate under the leadership of Murthy had unleashed an aggressive multimedia campaign targeted at large corporations in North America in order to shift the outsourcing model from an efforts-based model to a strategic results-based approach.

Mukherji of Avasant said, Going by his profile, Murthy did not allow anybody else to become the face of the organisation. He was a great marketing guy and he always en cashed on it.

However, he felt that iGate had enough talent within the company especially with takeover of Patni, adding, the board might have already identified a candidate.

The companys share price has hovered between $14 and $19 over the last two years on the Nasdaq stock exchange. On Tuesday, shares of iGate plunged 9.63% to $14.82 on Nasdaq following the announcement of Murthys termination, while the broader index had gone up marginally.

iGate, under Murthy, took the bold move to acquire Patni, which was two and half times its size, in early 2011 for $1.22 billion through an alliance with private equity player Apax Partners. The company had to incur a total debt of $1.03 billion, which also included the cost of delisting the IT firm from India.

The Patni acquisition was expected to give iGate unprecedented scale, higher access to global customers, the ability to play in larger deals and take on its bigger rivals Wipro, Infosys, TCS, Cognizant and HCL Technologies, head on. The Nasdaq-listed IT firm currently has over 27,500 employees across multiple locations.

iGate reported a revenue of $1.07 billion for fiscal 2012 with a net profit of $70.86 million. In fiscal 2011, it posted a revenue of $779.65 million with a net loss of $22.45 million.