The recently ‘Patni-enhanced’ iGate saw Q2 revenues (to 30th June) almost stall on a sequential basis, with a bare 1% revenue uplift on the stand-alone business to $77m (+15% yoy). However, Patni added almost another $100m, bringing headline revenues to $170m. Of course, the integration process also hit iGate’s margins, which fell to 5.2% (Q2 10: 17.2%) as it did Patni’s margins (see Patni hit by integration costs).
We’ll need to wait a few quarters to see how it all settles down, but the idea of knocking these two sub-scale players together to get one (nearly) scale player will have its challenges. For one, the acquirer was a third of the size of the acquired, so this is arguably more a reverse-in than an acquisition. Secondly, iGate does not have complete control of Patni (c84%), which retains its independent stock market listings, both in India and (via ADR) in the US, i.e. management has another set of investors whose interests need to be met. But the chances of either iGate or Patni ‘making the big time’ alone were slim, so let’s hope management can make this deal work.