iGate Global Solutions (IGS), has announced plans to de-list from Indian stock exchanges.
iGate Global Solutions (IGS), the 81.1% offshore subsidiary of Pennsylvania based IT and business process outsourcing firm iGate Corporation, has announced plans to de-list from Indian stock exchanges.
This may offer some comfort to investors, going by analysts, who expect the buyback price to be in the range of Rs 400-450.
Little wonder that the stock, which has been a big underperformer (it has underperformed the BSE Sensex as well as the BSE IT index in the past three years as well as the last three months), is up 55% to Rs 339.50 in the past four days.
Another reason, which can be attributed to the stock’s recent rise, albeit marginally, may be the expectation of good results.
For the quarter ended September 2007 (Q2), IGS announced results that were better than expected, which led the stock to inch up 7.06%. Revenues in Q2 were up marginally (0.7%) as against Q1 FY08 at Rs 200.80 crore, even as the rupee appreciated against the US dollar.
Most Indian IT firms derive a major share of their revenues from the US. The appreciation in rupee has led to fewer dollars coming in for these companies, thus affecting revenues.
Revenue growth was driven by an increase of 1.5% in the IT services volumes, which was the result of a 2.4% growth in offshore volumes.
Further, onsite billing rates were better and so were utilisation rates in Q2. IGS added 3 new clients in Q2, one of them being a Fortune 1000 company.
Simultaneously, cost control measures undertaken earlier seem to be paying off.
Direct costs were lower and so were the selling and marketing expenses. Hence, the company’s earnings before interest, tax, depreciation and amortisation jumped 20.2% — margins increased to 15.78% from 13.21% in Q1.
Thereafter, other income nearly doubled to Rs 2.75 crore. A big chunk of this (Rs 1.62 crore) pertained to foreign exchange gains and higher investment income consequent to an increase in the investment corpus.
Lastly, tax outgo halved to Rs 86 lakh, all of which led to net profits (before write-offs and prior period expenses) rising 42.6% in Q2.
At Rs 339.50, the stock trades at 17.65 times its last 12 months earnings per share, which is comparable with peers like Mastek and Hexaware. What, though, could have a visible influence on the stock is the buyback price from the promoters.
Contributed by Pallavi Pengonda & Devangi Bhuta
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