April 10, 2014 / 10:48 AM / 4 years ago

IGate says revenue to grow faster in second half, shares rise

(Reuters) - IT services company iGate Corp IGTE.O said revenue would grow faster in the second half of the year, after it reported better-than-expected quarterly results due to customer additions and higher revenue from Europe and financial industry clients.

IGate shares rose as much as 13 percent in noon trading, making the stock one of the top percentage gainers on the Nasdaq.

The company, whose bigger rivals include Tata Consultancy Services (TCS.NS), Infosys Ltd (INFY.N) and Cognizant Technology Solutions Corp (CTSH.O), added nine clients in the first quarter.

“Demand appears on track for strong second half - the company added several new contracts in quarter, involving software development, maintenance and testing services, and continues to carry strong pipeline,” Noble Financial Group analyst Vincent Colicchio wrote in a note.

Banks and companies are raising their IT spending as the global economy improves.

Exports by Indian IT companies are estimated to grow 13-15 percent in the year starting April, according to industry body National Association of Software and Services Companies.

Infosys and Tata Consultancy, which are scheduled to report results next week, have said they expected their main customers in Europe and the United States to increase IT spending.

“We are experiencing sustained and broad-based growth momentum across multiple service lines and geographies in our top five clients,” Chief Executive Ashok Vemuri said in a conference call with analysts.

IGate said it expected the pricing environment to be “fairly stable” this year.

Vemuri, an ex-Infosys executive who joined iGate in September, has increased the company’s focus on Europe, mid-sized clients and industries such as banking and finance, and insurance and retail. IGate also exited non-core markets such as Latin America.

Vemuri said iGate was “tracking favorably” in talks to win three large deals.

The company said it expected significant cost savings over the coming quarters due to its efforts to refinance and repay debt of $770 million.

Net income attributable to common shareholders fell to $23.3 million, or 29 cents per share, in the quarter ended March 31 from $27.1 million, or 34 cents per share, a year earlier.

    Excluding items, the company earned 45 cents per share.

    Analysts had expected earnings of 41 cents per share, according to Thomson Reuters I/B/E/S.

    Revenue rose 10 percent to $302.2 million, higher than the average analyst estimate of $300.8 million.

    Banking and financial services accounted for 23 percent of iGate’s total revenue, up from 22.2 percent a year earlier.

    The contribution of Europe, the company’s second largest market, grew to 16.5 percent of total revenue from 12.7 percent. The share of its largest market, North America, fell to 77.6 percent of total revenue from 80.3 percent.

    IGate’s gross margin declined to 37.5 percent in the quarter from 39.8 percent a year earlier as the company invested more in recruitments and software development.

    The company net added 1,102 employees, ending the quarter with 30,835 employees.

    IGate’s shares were up 12.6 percent at $37.39.

    Reporting by Soham Chatterjee in Bangalore; Editing by Kirti Pandey and Prateek Chatterjee

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