iGate Q4 net up 7.5 per cent; to take up to $325-million debt

Outsourcing firm iGate on Thursday reported a 7.5 per cent rise in net profit at $33.1 million for the quarter ended December 31, 2013, helped by large deals in the North America and Europe.

The US-based company also announced that it expects to take an additional loan of $300-325 million by April this year to fund a debt of $770 million, which is due in May this year.

The Nasdaq-listed firm had posted a net profit of $30.8 million in the year-ago period, it said in a release.

Net revenues rose by 10.2 per cent at $299.3 million in October-December, 2013, against $271.6 in the same quarter of 2012.

iGate follows January-December as fiscal year. The figures are on GAAP basis.

"I am happy with the firm's performance in 2013 and particularly pleased with the nature of large deals signed during the year," iGate's president and CEO, Ashok Vemuri, said on a conference call.

On a quarter-on-quarter basis, iGate's net income rose by 3.76 per cent and revenues were up by 2 per cent.

"We have successfully finished regrouping the organisation into vertical-based business units that bring in more industry knowledge and solutions, move us closer to the customer, and increase the depth and accountability to the business," Mr Vemuri said.

On the vertical alignment in the firm, he said this restructuring will help the firm better leverage the enormous talent, institutionalise the deliver engine, increase focus of the sales team, identify client issues faster to drive growth.

"We believe due to our size and scale, we needed to restructure the organisation into focused units with deeper domain capabilities that streamline our go-to-market themes..."

"We entered into a $360-million credit agreement in November 2013 and expect to take in approximately $300-325 million additional debt towards the end of April in order to re-finance $770 million which comes due in mid-May 2014," iGate CFO Sujit Sircar said, while on the company's debt issue.

iGate added 9 clients during the fourth quarter with four in North America and 5 from Europe. Six clients were from the manufacturing sector and one each from insurance, healthcare and life-sciences and business and financial services, Mr Vemuri said.

On clients, Mr Sircar said total active clients stood at 302 and as part of re-alignment iGate are winding up its smaller accounts which are not strategic ti the firm The company closed 17 such accounts in the October-December quarter.

For the entire 2013 fiscal, iGate reported a 35.5 per cent rise in net income at $129.8 million against $95.8 million in 2012.

Net revenues rose by 7.5 per cent to $1.15 billion as compared to $1.07 billion during the same period.

As of December 31, 2013, iGate had 29,733 employees with a net addition of 1,450.

Mr Vemuri said Europe will be a focus area for the firm.

"Europe continued to perform well due to ramp-ups in some of the large deals that we had won in the past and it will be a focus area for us and will continue to attract additional investments," he said.

"We have fixed the countries in Europe that we will focus on, make the investments and build a stronger go-to-market theme."

On the investments by the company, he said that iGate will spend about $200 million to augment the capacity of its delivery centres.

The firm added over 1,600 seats in delivery centres in Mumbai and Hyderabad this quarter, besides, setting up a delivery centre in Halifax (Canada). The company will be also set up centres in Eastern Europe.

These near-shore centres will help the company expand its service delivery capabilities for clients. The firm is also establishing an iGate university for training of its employees, Mr Vemuri said.

On the strategic priorities, he said the firm intends to capitalise the growth opportunities and to achieve this, it will make investments in "solutions (products and platforms), sales and go-to-market (from a people perspective) and physical infrastructure".

On 2014 outlook, MR Vemuri said the macro-economic environment continues to improve and the industry poised for growth.

He, however, said the second half of 2014 is expected to be better, while, small sequential growth is expected in the first half of this year.

On margin growth, he said, "We are investing for growth, but recognise that growth will take time."

iGate said that it is seeing ramp-ups in its existing businesses and there is a healthy deal pipeline.

The financial services and communication business is also witnessing a good traction.

The company said it expects to close two or three large deals by the middle of second quarter or beginning of the second half of 2014.