iGATE: Right on target
The firm reported a robust growth in operational efficiency during the quarter ended September 2007 compared to the year-ago quarter as well as year-ago levels.
By Ravi Ananthanarayanan and Ranjit Shinde, TNN |
iGATE Global Solutions (iGS) is right on its target to boost operating margin to the 15% mark. It reported a robust growth in operational efficiency during the quarter ended September 2007 compared to the year-ago quarter as well as year-ago levels. Its topline, however, remained flat on account of sluggish business in Europe and Asia and the subprime turmoil in the US market.
iGS has reported over 250-basis point (bps) improvement in operating margin at 15.8% on quarter-on-quarter basis. When compared to the year-ago levels, the jump was even sharper at 600 bps. The change in net margin was equally robust.
The turnaround in margins was due to increased offshoring and higher utilisation. iGS has shown gradual improvement in the offshoring component of its revenue. During the September 2007 quarter, offshore services contributed 78% to total revenue compared to 72% a year ago.
Higher share of offshoring activities is desirable given its high profitability compared to the onsite projects. Resource utilisation shot up 400 bps y-o-y to 72%. Improved onsite business mix, led by more of ERP and consultancy-based projects, saw a marginal rise in onsite billing rates.
This aided higher realisations despite 2% appreciation in the rupee against the dollar during the three months ended September. Also, to tackle the rupee-dollar debacle, the company has undertaken long-term hedging practice. At the end of the second quarter, the company has $54 million of forward cover at a rate of Rs 41.83.
iGATE Corp, the Nasdaq-listed parent of iGS, has proposed to delist the latter from the Indian bourses citing the reason of realigning of its capital structure. According to the management, cost of capital is lower in the US than in India. Furthermore, at a given level of earnings per share, valuations enjoyed by IT companies of iGATE’s size are greater than in India. Following the announcement, iGS shares ended 8% higher on BSE.
iGS has reported over 250-basis point (bps) improvement in operating margin at 15.8% on quarter-on-quarter basis. When compared to the year-ago levels, the jump was even sharper at 600 bps. The change in net margin was equally robust.
The turnaround in margins was due to increased offshoring and higher utilisation. iGS has shown gradual improvement in the offshoring component of its revenue. During the September 2007 quarter, offshore services contributed 78% to total revenue compared to 72% a year ago.
Higher share of offshoring activities is desirable given its high profitability compared to the onsite projects. Resource utilisation shot up 400 bps y-o-y to 72%. Improved onsite business mix, led by more of ERP and consultancy-based projects, saw a marginal rise in onsite billing rates.
This aided higher realisations despite 2% appreciation in the rupee against the dollar during the three months ended September. Also, to tackle the rupee-dollar debacle, the company has undertaken long-term hedging practice. At the end of the second quarter, the company has $54 million of forward cover at a rate of Rs 41.83.
iGATE Corp, the Nasdaq-listed parent of iGS, has proposed to delist the latter from the Indian bourses citing the reason of realigning of its capital structure. According to the management, cost of capital is lower in the US than in India. Furthermore, at a given level of earnings per share, valuations enjoyed by IT companies of iGATE’s size are greater than in India. Following the announcement, iGS shares ended 8% higher on BSE.
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