IGate may hive off its staffing business

IGate may hive off its staffing business
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First Published: Wed, Jan 09 2008. 11 57 PM IST
Updated: Wed, Jan 09 2008. 11 57 PM IST
Bangalore: Having acquired the required number of shares to delist its offshore subsidiary iGate Global Solutions Ltd (IGS) from the Indian exchanges, iGate Corp. is exploring options to hive off its staffing business.
The $100 million (Rs393 crore) annual revenues staffing business consists of entities such as iGate Mastech and RPOworldwide. IGS is 93.44% owned by iGate and the company will offer Rs410 per share to acquire the remaining shares over the next six months.
“We are studying options whether hiving off of the staffing business will increase the value of iGate Global or not,” said Phaneesh Murthy, board member of iGATE and chief executive of IGS.
The delisting, expected to be complete by end-January, was the last piece of puzzle in cleaning up the capital structure.
“If the staffing business does get sold, we will end up with a clean structure like Cognizant and Syntel, where the company will be US-listed, with its operations in India,” Murthy said.
The delisting will help IGS create an aggressive culture, while there won’t be any dramatic change in the functioning of the company. The employees will get compensation with US stock options, he said.
IGS saw its net profits for the third quarter ended December increase to Rs29.1 crore from Rs16 crore in the same period the year before, while revenues marginally declined to Rs209.3 crore from Rs210.7 crore.
Murthy attributed the improved profitability to better billing rates.
IGS saw an average 3% improvement in its blended bill rates and its operating profit margins improve 1.7% to 17.5%.
Further, IGS expects to enter newer markets, such as tenancy bond, leasing and insurance with its integrated technology operations model, which should help the company to accelerate its growth.
Murthy maintained that IT budgets of customers for 2008 will be flat or marginally higher than that of 2007 and said the company has been signing new customers at 4-5% higher rates. IGS signed three new customers in December quarter, including Union Bank of California.
IGS, Murthy said, has not seen any changes in the spending behaviour of its customers such as General Electric Corp. (GE) and the Royal Bank of Canada. GE, the company’s largest customer, accounted for 25% of revenues.
Any fallout of concerns over the squeeze in the budgets for 2008 would be clear by February or March, Murthy said. “We are seeing start of many new projects, which indicates that clients are spending on various new initiatives,” he said, adding the company’s pipeline was pretty healthy.
IGate shares hit a 52-week high of Rs435 on the Bombay Stock Exchange on speculation that the firm may increase its price to acquire the remaining 6.56% shares, but closed at Rs400.85, up 1% at the end of trading on Wednesday.
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First Published: Wed, Jan 09 2008. 11 57 PM IST