California-based iGATE (Nasdaq: IGTE) has plenty of reasons to cheer. It recently completed its $1.2 billion acquisition of Mumbai-based Patni Computer Systems (NYSE: PTI). It also just posted a nearly 54% increase in its first-quarter net income.

From all indications, iGATE appears to be riding high, but let's take a closer look at the first quarter and look forward to see whether this success will continue.

Figuring it out
Revenues for the company increased by almost 31% to $75.8 million compared to the start of last year. However, they also fell by almost 6% on a sequential quarter basis. This drop was mainly due to project delays, as clients, at the start of the year, had yet to finalize their IT budgets.

Incidentally, the company suffers the fate of having a relatively small number of clients who can either make or break entire quarters. For example, the biggest revenue provider in the first quarter was the Royal Bank of Canada (NYSE: RY), which contributed almost 38% to its total revenues. The company's top five customers accounted for 73% of total revenues overall. That's a bit scary but isn't totally unusual for the industry. Also, the company's purchase of Patni should help iGATE diversify its customer base.

Zooming out
If we look at the trend throughout 2010, iGATE's top line increased continuously throughout the year. This year, fueled in part by the Patni deal, we can expect this number to go way up. Patni raked in $190.1 million in the first quarter of the year.

iGATE's net income for the first quarter went up by 54% to $17.9 million on a year-on-year basis. EBITDA went up by almost 41%. The adjusted EBITDA excluding the acquisition-related expenses was almost $20.5 million, up from $14.4 million a year ago, which is pretty impressive.

Cash flow, however, was steeply down. iGATE attributed the decline to acquisition-related expenses and a ramp up in days sales outstanding. Rising DSO, a measure of a company's ability to collect revenue, can be troubling. However, iGATE attributed the rise in a large customer changing its billing methods. Seeing as how large customers should be credit-worthy, this rise shouldn't be troubling if it corrects itself in future quarters. However, this is an area investors should keep an eye on in future earnings releases.

The Foolish bottom line
iGATE has had a strong start to the year, and I think it looks strong for the rest of the year as well. The merger with Patni not only gives it access to a wider market in India, which is continuously growing, but also better equips it to face competitors such as Accenture (NYSE: ACN) and Wipro (NYSE: WIT). Estimates say that as India's gross domestic product rises, the IT market is expected to expand by a compounded annual growth rate of almost 13.2%, till 2015. This will surely work to iGATE's benefit and see it boost both its top and bottom lines.

Keep up with iGATE by tracking the company in our free watchlist service, My Watchlist.

Shubh Datta doesn't own any shares in the companies mentioned above. Motley Fool newsletter services have recommended Accenture. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.