Patni's Q1 CY2008 Revenues Up 13.1% at US$ 176.4 million

Business Wire,  April 30, 2008  

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MUMBAI, India -- Patni Computer Systems Limited (Patni) today announced its financial results for the first quarter ended 31st March 2008.

Performance Highlights for the quarter ended March 31, 2008

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Future Outlook:

* Q2 CY2008 revenues are expected to be at US$ 180 to US$ 181 million and net income (excluding the foreign exchange gain/loss) is expected to be in the range of US$ 22.0 to US$ 23.0 million taking the operations at a constant dollar value of Rs 40 per US$ for the quarter.

Management Comments

Commenting on the quarter, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, "While Revenue and Profits are in line with our guidance we are in a cautious market situation in 2008 with uncertainty and volatility in global markets. We are running our business in lower than normal visibility. At the same time we find ourselves in good position and remain confident of our prospects on mid to long term basis. We are making all the investments necessary to diversify our business. We have recently appointed Mr. Louis Theodoor (Loek) van den Boog from our Board as Executive director of the company to expand and deepen the management."

The newly appointed Executive Director Mr. Loek van den Boog said, "We are committed to build Patni to a next generation services company with adequate differentiation and Business Solutions oriented focus leveraging the global delivery model. We are confident of our abilities to transform the business with mix of internal and market based measures to enhance overall shareholder value with profitable and sustainable growth."

Commenting on the performance, Mr. Mrinal Sattawala, Chief Operating Officer, Patni, said, "During the current quarter our revenue base has been diversified further resulting in reduced dependence on top 10 accounts. For the quarter under review we have added 34 new clients bringing our tally of active clients to 331. Going forward we expect to leverage our operating efficiencies significantly to grow profitability."

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer, Patni, said, "We continue to take steps in rationalization of internal operations to manage costs, and invest in our business to increase our services and market foot prints. We are actively looking for strategic acquisitions and shall invest in the business on all dimensions. We are seeking these acquisitions in BPO, Enterprise applications and consulting specifically in UK and Continental Europe and are expanding geographically to enhance our presence in the region. Similarly Product Engineering business is an area of identified investments organically and inorganically."

Corporate Developments

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Financial Statements Analysis:

Revenues

Revenues during the quarter were marginally ahead of guidance at US$ 176.4 million (Rs.7,061.2 million), representing a sequential increase of 1.3% and 13.1% increase on YoY basis in US dollar terms. In line with our expectation share of Europe and Middle East business has increased to 17.6% from 15.9% YoY while Asia Pacific share has grown to 5.8% from 4.3% YoY.

Gross Margin

Gross Margins were at 28.7% or US$ 50.6 million (Rs.2,024.7 million) against 30.5% or US$ 53.1 million (Rs.2,092.5 million) in the previous quarter.

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Selling General and Administrative Expenses (SGA Expenses)

* Sales and marketing expenses during the quarter were at US$ 12.3 million (Rs. 494.1 million) at 7.0% as compared to US$ 11.8 million (Rs. 463.1 million) at 6.7% in previous quarter.

* G&A expenses during the quarter were at US$ 18.7 million (Rs.748.7 million) at 10.6% as compared to US$ 18.8 million (Rs.739.8 million) at 10.8% in previous quarter.

* Overall Depreciation and Amortization expenses in SGA were US$ 2 million for the quarter as against US$ 1.8 million in Q4 2007.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange loss for the quarter US$ 2.2 million (Rs. 89.0 million) as compared to forex exchange gain of US$ 4.7 million (Rs.185.0 million) in previous quarter.

The quarter end rate for debtor's revaluation was Rs. 40.11. Outstanding contracts at the end of Q108 were about US$ 337.5 million contracted in the range of Rs.39.77 to Rs.43.50.

Other Income

For Q1 CY2008, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 2.1% or US$ 3.7 million (Rs.148.4 million) compared to 1.6% or US$ 2.8 million (Rs. 109.9 million) in previous quarter.

Profit before Tax

PBT was down 29.5% sequentially at US$ 21.0 million (Rs. 841.8 million) against US$ 29.8 million (Rs.1,176.2 million) in previous quarter due to changes in gross margin and foreign exchange gain/loss.

Income Taxes

Income tax for the quarter was at US$ 2.9 million (Rs. 117.2 million) at an effective tax rate of 14%. Overall normalized effective tax rate is in the range of 15.5%-16%.