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Our Bureau

Bangalore Oct. 10 Better pricing and productivity coupled with controlled expenses and foreign exchange gains helped iGATE Global Solutions to report 126 per cent rise in second quarter (Q2) net profit over the corresponding last quarter even as revenues stayed flat.

The company reported a better than expected net profit of Rs 22.9 crore on revenues of Rs 200.8 crore in the second quarter of fiscal 2008 compared with a net of Rs 10.1 crore on revenues of Rs 202.6 crore in Q2 of FY07. On a sequential basis, the net profits were up 60 per cent but revenues were flat.

Parent iGATE Corporation announced its intention on Tuesday to delist its Indian subsidiary iGATE Global from the BSE, NSE and Bangalore Stock Exchanges as part of the capital structure clean-up. The delisting if successful is expected to be completed by December.

iGATE Corp owns 81.1 per cent in iGATE Global, while institutions own about 5.7 per cent, senior executives hold four per cent, and public holds the remaining stake. Currently iGATE Global shares are trading at a discount to iGATE Corp shares on Nasdaq.

Following the announcement, iGATE shares opened high and hit the circuit limit at Rs 348.50 before closing at Rs 339.50, a gain of seven per cent over the previous close. The company’s shares have gained 55 per cent in the past one week and 37 per cent over the past month.

“We closed the second quarter with a healthy order book giving us optimism for revenue growth. In addition, improved productivity and efficiency coupled with our differentiated iTOPS model helped us grow margins strongly,” said Mr Phaneesh Murthy, CEO, iGATE Global Solutions.

“The sub-prime crisis is largely behind us,” Mr Murthy said. “We are looking at addressing our revenue growth concerns by strengthening our sales engine,” he said.

Operating margins improved to 15.8 per cent during Q2 compared with 9.9 per cent in the corresponding last quarter and 13.2 per cent in the previous quarter. iGATE aims to improve its operating margins further and has set a target of 20 per cent by March 2009, he said.

The company expects to add about 600-800 employees to its existing headcount of 5,977 over the next two quarters and is investing about Rs 120 crore in expanding its Bangalore facility, by adding 3,500 more seats.

iGATE reported a forex gain of Rs 1.6 crore due to better hedging, said Mr N. Ramachandran, CFO. The company has taken long-term hedge deals for 2-3 years to manage the expected rupee rise against US dollar and has a total hedge of $54 million.

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