iGate Global FY05-06 consolidated net profit drops 74 per cent

12 April 2006

Mid-sized IT services company iGate Global Solutions has reported fourth quarter and full year results which are in line with expectations. The company continues to face margin pressures on higher wage costs even as the management said billing rates have stabilised. iGate''s performance over the last couple of years has been highly inconsistent.

For the full year 2005-06, iGate's consolidated net profit has declined 73.95 per cent to Rs5.53 crore from Rs21.22 crore for the previous year. Consolidated revenues for the year increased 6.25 per cent to Rs635.31 crore from Rs597.93 crore.

The company''s bottom line suffered because of a sharp drop in other income to Rs39 lakhs for the year 2005-06 from Rs19 crore for the previous year. Write-offs for decline in value of investments during the year were Rs11.54 crore.

Operating margins improved during the year to 9.57 per cent as compared to 7.52 per cent for the previous year, but is still way below industry average. The improvement in margins was achieved through better control of other expenses, which increased only marginally during the year. Salary expenses jumped 38.6 per cent as compared to previous year. iGate has reported a consolidated net profit of Rs4.71 crore for the quarter ended 31 March 2006, a growth of 111.21 per cent as compared to Rs2.23 crore reported for the same quarter of previous year. Consolidated revenues increased 14.71 per cent to Rs167.09 crore from Rs145.66 crore for the prior year quarter.

As compared to the previous quarter ended December 2005, net profit on a stand alone basis for the March 2006 quarter has dropped 43.36 per cent even as revenues increased marginally.

Operating margins for the last quarter declined to 10 per cent from 15.44 per cent for the quarter ended December 2005. Staff costs increased 15.7 per cent as compared to the December quarter on a stand alone basis, far lower than revenue growth of 2.5 per cent.