The Hindu Business Line : US mortgage meltdown, strong rupee hit iGATE

Mr Phaneesh Murthy (right), CEO, iGATE Global Solutions, and S.Ramachandran, CFO, at a press conference in Bangalore on Wednesday. - G.R.N. Somashekar

Bangalore April 11

The US sub-prime mortgage meltdown coupled with a strong rupee impacted iGATE Global's revenue growth for the quarter-ended March 31, 2007, over the previous quarter.

But the company registered a four-fold rise in net profits driven by improvements in operational matrices, surpassing its targeted operating profit margin goal of 15 per cent.

Dividend Declared

iGATE reported a net profit of Rs 22.6 crore on revenue of Rs 210.1 crore for quarter-ended March 2007 compared with a net of Rs 4.7 crore on revenue of Rs 210.8 crore in the preceding December quarter. Revenues of the company rose 25.5 per cent

For financial year 2006-07, iGATE registered a net profit of Rs 49.8 crore on revenues of Rs 805.1 crore compared with a net of Rs 5.5 crore on revenue of Rs 635.8 crore. For FY07, operating margins stood at 11.4 per cent compared with 9.6 per cent in the previous year.

The iGATE board of directors declared a dividend of Rs 2.4 per share.

Following the results, iGATE shares edged up on the BSE to touch an intra-day high of Rs 422 before closing at Rs 385.05, a loss of 4.35 per cent.

"FY07 witnessed ramp-ups in some of our strategic accounts helping us grow revenue and deliver robust year-on-year growth in net profit," said Mr Phaneesh Murthy, CEO, iGATE.

Mortgage Industry

"We are concerned about the mortgage meltdown as our revenues from loan fulfilment process have been adversely impacted. We expect the sluggishness to continue in the first quarter," Mr Murthy said.

iGATE derives close to 10 per cent of revenues from its integrated technology operations (iTOPs) practice, which caters to the mortgage industry. Majority of iGATE's client in mortgage industry have gone bankrupt.

iGATE added 25 new customers in FY07, increasing the number of million dollar accounts to 29, up from 19 in last year.

The company saw ramp-ups from General Electric, which accounted for 26 per cent of total revenues and from Royal Bank of Canada among others. Offshore contribution stood at 73 per cent, up from 71 per cent last year.

iGATE added 793 employees to increase its headcount to 5,945. "We will be adding upwards of 1,000 employees in the current financial year," Mr Murthy said.

Further, Mr Murthy said iGATE will continue to invest in its employees and the board has approved a new restricted stock programme to cover a wider employee base of over 1,000.

Mr S. Ramachandran, CFO, said the operating revenue for the quarter was impacted by 2.1 per cent due to a stronger rupee.

But the impact was largely offset by the hedging position that the company had taken earlier.

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