iGate Global Solutions: Miles to Go

The continuing upturn in technology market is now helping even
mid market companies to raise revenues and margins. As the demand for services
increase, companies typically look at new services and are more open to
including new vendors and revising price structures. This enables smaller
companies to enter new accounts, which were otherwise held by typically larger
competitors.

As this trend gains further momentum, it is expected that some
of the laggards of the industry improve their fortunes and reckon in the near
future. Among the companies that were under pressure for some time and are now
performing a lot better is Bangalore based iGate Global. With a much-improved
numbers in the third quarter and key inductions in management, the company
expects significant upswing in its operating parameters.

iGATE Global Solutions is an integrated technology service
provider. The company offers a range of business solutions spanning consulting,
technology, operations and process outsourcing to its customers in a range of
industries, including banking and financial services, manufacturing, retail and
distribution, and telecommunications. The company has been assessed at SEI-CMM
Level 5, follows Six Sigma methodologies and is BS7799&COBIT certified
company. Headquartered in Bangalore, iGATE Global is present in 12 countries and
maintains development centers in the US, UK, Canada, China, Malaysia and India.

The company's current equity stands at Rs 12.43 crore with the
promoters holding 81.95%, the public holding 10.55% and institutional investors
holding 7.50% of the stake. The company has been promoted by Mr Ashok Trivedi,
the chairman, and Mr Sunil Wadhwani, the vice chairman.

Consolidated revenues for the financial year ended March 2006
amounted to Rs 635.78 crore, an increase of 9.63% from Rs 579.95 crore in the
last fiscal. Net profit for the same period stood at Rs 17.27 crore, a decline
of 0.80% from Rs 17.41 crore in the same period last year.

During the year, iGate acquired the entire share holding of
Ciber. IGate also set up an ERP Center of Excellence in Hyderabad to focus on
business intelligence and ERP testing. IGate implemented the COPC, a performance
management framework for all its contact centers in Noida. IGate signed a
multi-year agreement with Owens Corning, a leading global insulations company.

During the third quarter ended Dec 31, 2006, iGate revenues
stood at Rs 210.73 crore, an increase of 27.60% y-o-y basis from Rs 165.15 crore
and an increase of 4.0% q-o-q basis from Rs 202.62 crore. Revenues from IT
services grew by 4.70% from Rs 180.11 crore in sequential quarter Q2, 2007 to Rs
180.65 crore in Q3, 2007, which resulted due to an increase of 8.9% in overall
volumes. Offshore revenues contributed 46.3% from Rs 80.90 crore in the
sequential Q2, 2007 to Rs 87.43 crore an increase of 8.1%, while onsite revenues
contributed 53.7% from Rs 99.21 crore in Q2, 2007 to Rs 101.21 crore, an
increase of 2%. Net profit increased by 57.3% at Rs 15.95 crore compared to Rs
10.14 crore achieved in the preceding quarter q-o-q basis and an increase of
1126.9% from Rs 1.30 crore in the same period last year. The quarter witnessed
an addition of 301 employees from 5520 in Q2, 2007 to 5821 in Q3. 2007.The
number of million dollars clients increased to 29 from 26 in the last quarter.

During the quarter, iGate entered into an IT partnership
agreement with Radian Group, provider of credit solutions to the financial and
capital markets. iGate set up its Independent Verification and Validation
(IV&V) Center of Excellence (COE) at its software development facility in
Bangalore. The company hired Srinivas Kandula as global head, Human Resource,
who was previously the director, HR, at Sasken Technologies and has 17 years of
experience in HR and has led strategic initiatives both at NTPC and Sasken.
iGate also hired Sean Narayanan as Sr VP, IT services to head its Infrastructure
Management Services (IMS), Business Intelligence and Data Warehousing Practices
with over 16 years of experience both in the US and India. Sean was previously
the VP and global practices head at Cognizant IT Infrastructure Services.

iGate currently trades at Rs 356. Despite the strong performance
in the last quarter, the company's margins and revenue growth remain
significantly below the industry standards and do not merit the current
valuation. Underperformer.

Sushanto Mitra

The author is the director, Techcap India

sushanto@techcapIndia.com

The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented here