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A combination of management distraction over the impending Patni acquisition (see iGate seals Patni deal), coupled with demand softness, slashed operating margins by half at US-headquartered but India-centric IT services firm, iGate.
Headline revenues in Q1 (to 31st March) fell by 6% qoq to $75.8m, though over 30% higher yoy. But a doubling of SG&A costs took last year’s 19% operating margin down to 9.2%. iGate’s gross margin actually improved yoy (41% vs 40%), indicating that they stack the (I assume much expanded) bench in SG&A. Normally iGate’s margins are substantially higher than those at larger peer Patni, but even under the arguably more demanding distraction of being subsumed, Patni was more profitable in the quarter (see Patni’s margins suffer in limbo period). iGate recently raised $770m in loan notes to complete the acquisition – expected next week.
