Patni Q3 Revenues at $183.5 million, in Line with Guidance

Patni Computer Systems Limited (Patni) today announced its financial results for the third quarter ended September 30, 2008.

Important Note: Based on prior year’s tax reviews by IRS, which were concluded during the quarter, certain provisions have been reversed resulting in one time increase in gross profit of US$ 2.8 million, other income of US$ 8.3 million and decrease in tax expense of US$ 7.7 million. Consequently, profit after tax has increased by US$ 18.7 million. Variation in Patni’s Q3 2008 financial performance as a result of such reversals have been referred to as “Extra Ordinary Items” in this press release.

Performance Highlights for the quarter ended September 30, 2008

– Revenues for the quarter at US$ 183.5 million (Rs. 8,522.5 million)

- Up 8.3% YoY from US$ 169.5 million (Rs. 6,735.7 million)
- Up 0.5% sequentially from US$ 182.6 million (Rs. 7,837.1 million)
- Contribution from top customer marginally changed at 10.5% for the quarter as compared to 10.4% during previous quarter

– Operating Income for the quarter at US$ 27.6 million (Rs. 1,283.9 million)

- Down 4.6% YoY from US$ 29.0 million (Rs. 1,151.4 million)
- Up 64.6% sequentially from US$ 16.8 million (Rs. 720.7 million)
- Operating Income adjusted for Extra Ordinary items is at US$ 24.9 million for the quarter, sequential increase by 48.1% and is lower by 14.1% on YoY basis.

– Net Income for the quarter at US$ 43.1 million (Rs. 2,001.9 million)

- Up 56.0% YoY from US$ 27.6 million (Rs. 1,097.8 million)
- Up 78.4% sequentially from US$ 24.2 million (Rs. 1,037.2
million)
- Net Income adjusted for Extra Ordinary items is at US$ 24.4 million for the quarter, sequential increase by 1.0% and is lower by 11.6% on YoY basis.

– EPS for the quarter at US$ 0.32 per share (US$ 0.63 per ADS). EPS adjusted for one time Extra Ordinary items is at US$ 0.18 per share ( US $ 0.36 per ADS)

– Share Buy back Programme completed

Future Outlook:

– Q4 CY2008 Revenues are expected to be at US$ 176 to US$ 177 million and Net Income (Excluding the Foreign Exchange Gain/Loss) is expected to be in the range of US$ 22.0 to US$ 22.5 million

– This guidance is based on Constant Rupee -USD rate of Rs 47 and constant GBP –USD rate of 1.85 , EURO-USD rate of 1. 35

– Mark to Market Forex loss during Q4 2008 is expected o be in the range of $10m based on current estimates. This may change depending on further currency movements during the quarter and will impact our Net Earnings accordingly.

Management Comments

Commenting on the quarter, Mr. Narendra K Patni, Chairman and CEO, Patni Computer Systems Ltd., said, “ We are witnessing deep global meltdown in the markets and this will impact our business in short term. We expect the environment to remain uncertain and volatile and with low visibility. However we remain bullish on mid term prospects of our business and continue to invest to enhance our position in the market place across all dimensions of our business.”

Mr. Loek van den Boog, Executive Director, said, “Current financial crisis will have indirect impact on our industry. In short run we expect to see volatility. However we are very confident that as the environment settles the overall demand for global outsourcing will increase. We are working very closely with our customers in this tough times and remain positive of our mid to long term prospects.”

Speaking on the occasion, Mr. Surjeet Singh, Chief Financial Officer said “The currency benefit due to sharp depreciation of Rupee was seen at operating level as Dollar appreciated against all major currencies. We are managing our business tightly on operating parameters. Our cash position is healthy and we continue to remain acquisitive to expand our services portfolio and geographical presence. We continue to remain focused on managing the business tightly and efficiently.”

Corporate Developments

– BPO Infrastructure expansion

Patni recently launched its first Green IT-BPO knowledge centre in Noida. The facility is spread over 5 acres and has a seating capacity of over 3500. Christened as Patni Knowledge Centre, the facility was recently awarded the prestigious LEED Platinum (Leadership in Energy and Environmental Design) rating recognizing the company’s commitment to superior standards of quality, and efficient utilization and conservation of energy, water and natural resources. This makes the Patni Knowledge Centre the second largest Platinum rated building in the world, and the largest Platinum rated building outside the United States. This complements the organization’s green initiatives towards environment conservation.

– Share Buy back Programme completed

During the quarter ended September 30, 2008, the Company bought back total 8.96 million equity shares on Indian stock exchanges for a total aggregate consideration of Rs 2012.5 million ( US $ 43.3 million) being 84.86% of the total buy back size .The total buyback has since been completed as of date and the company has purchased total of ~11 million shares for at avg prices of Rs 216.3 per share with total aggregate consideration of Rs 2370 million ( ~ $ 51 million)

Financial Statements Analysis:

Revenues

Revenues during the quarter were marginally ahead of guidance at US$ 183.5 million (Rs.8,522.5 million), representing a sequential increase of 0.5% after (-)1% change due to currency impacts. YoY revenues up 8.3% increase on YoY basis in US dollar terms.

Gross Margin

Gross Margins were at 33.5% or US$ 61.5 million (Rs.2,857.0 million) against 30.3% or US$ 55.4 million (Rs.2,377.5 million) in the previous quarter. Gross Profit adjusted for Extra Ordinary Items is at US$ 58.7 million at 32.0% during the quarter. Improvement in Gross Margin is on account of Rupee & other currencies depreciation by 1% and 0.5% on account of other operating efficiencies.

Depreciation and amortization expenses in CGS were US$ 4.9 million against US$ 5.0 million in Q2 2008 and US$ 4.6 million in Q3 2007.

Selling General and Administrative Expenses (SGA Expenses)

– Sales and marketing expenses during the quarter were at US$ 13.2 million (Rs. 612.0 million) at 7.2% as compared to US$ 13.8 million (Rs. 593.2 million) at 7.6% in the previous quarter. G&A expenses during the quarter were at US$ 21.2 million (Rs.985.9 million) at 11.6% as compared to US$ 19.8 million (Rs.852.0 million) at 10.9% in the previous quarter. Normalized for one time expense it is in line with previous quarter at 10.9%.

– Overall Depreciation and Amortization expenses in SGA remained unchanged as compared to previous quarter and were US$ 2.1 million for the quarter.

Foreign exchange gain/loss

The revaluation and mark to market foreign exchange gain for the quarter US$ 1.2 million (Rs. 54.5 million) as compared to foreign exchange loss of US$ 4.7 million (Rs.201.6 million) in the previous quarter. The change was largely due to sharp decline in forward premia’s during the quarter.
The quarter end rate for debtor’s revaluation was Rs.46.95.Outstanding contracts at the end of Q308 were about US$ 443.24 million contracted in the range of Rs.39.3 to Rs.47.

Other Income

For Q3 CY2008, other income (including interest and dividend income net of interest expenses, profit/loss on sale of investments and other miscellaneous income) stood at 6.2% or US$ 11.4 million (Rs.527.9 million
Other Income adjusted for Extra ordinary items at US$ 3.1 million at 1.7% during the quarter lower than $11.3 million during previous quarter due to cyclical change on account of Fixed maturity investments.

Profit before Tax

PBT was up 38.7% sequentially at US$ 39.0 million (Rs. 1,811.8 million) against US$ 28.1 million (Rs. 1,206.9 million) in the previous quarter. PBT adjusted for Extra Ordinary items at US$ 28.0 million, representing sequential decrease of 0.5%

Income Taxes

Income tax for the quarter was at US$ (-) 4.1 million (Rs. 190.1 million). Income Tax after adjustment of Extra Ordinary items is at US $ 3.6 million at an effective tax rate of 13%.

Net Income

Net income for the quarter at 23.5% was US$ 43.1 million (Rs.2,001.9 million) against US$ 24.2 million (Rs.1,037.2 million) at 13.2% in the previous quarter. Net Income adjusted for Extra Ordinary items at US$ 24.4 million at 13.3% for the quarter.

Balance Sheet and Cash Flow changes

During the quarter, against net income of US$ 43.1 million (Rs.2,001.9 million), cash from operating activities was at US$ 27.1 million (Rs. 1,261.0 million) net of changes in current assets and liabilities of US $ (-) 26.9 million and non cash charges of US$ 10.9 million. These non cash charges comprise of depreciation and amortization including compensation cost of US$ 7.9 million, and other charges US$ 3.0 million.

Net cash from investing activities was US$ 22.4 million (Rs.1,042.2 million) including capital expenditure of US$ 6.0 million (Rs.279.9 million),net proceeds from sale of investments of US$ 28.5 million (Rs. 1,322.1 million)

Net Cash outflow on financing activities was US$ 54.8 million (Rs.2,547.2 million) comprising of payment of buy back of shares of US$ 43.3 million (Rs. 2,012.5 million) and dividend on common shares of US$ 11.4 million (Rs.531.4 million) and US$ 0.1 (Rs.3.2 million) on other financing activities. Net of translations change of $ 31.7 million , over all cash and cash equivalents (including short term investments) were at US$ 278.6 million (Rs.12,938.7 million), compared to US$ 343.9 million (Rs.14,762.8 million) at close of Q2 2008.

Receivables at the end of Q3 2008 were at US$ 137.0 million as compared to US$ 116.5 million at the end of Q2 2008. Number of days outstanding (Including Unbilled) for current quarter were 89 days similar to previous quarter.

Important Notes to this release:

– Fiscal Year

Patni follows a January – December fiscal year. The current review covers the financial and operating performance of the Company for the third quarter ended September 30, 2008

– U.S. GAAP

A Consolidated Statement of Income in US GAAP is available on page 3 of the Fact Sheet attached to this release

– Percentage analysis

Any percentage amounts, as set forth in this release, unless otherwise indicated, have been calculated on the basis of the U.S. Dollar amounts derived from our consolidated financial statements prepared in accordance with U.S. GAAP, and not on the basis of any translated Rupee amount. Calculation of percentage amounts on the basis of Rupee amounts may lead to results that are different, in a material way, from those calculated as per U.S. Dollar amounts.

– Convenience translation

A Consolidated Statement of Income as per Convenience Translation prepared in accordance with US GAAP is available on page 7 of the Fact Sheet attached to this release. We have translated the financial data derived from our consolidated financial statements prepared in accordance with U.S. GAAP for each period at the noon buying rate in the City of New York on the last business day of such period for cable transfers in Rupees as certified for customs purposes by the Federal Reserve Bank of New York. The translations should not be considered as a representation that such US Dollar amounts have been, could have been or could be converted into Rupees at any particular rate, the rate stated elsewhere in this document, or at all. Investors are cautioned to not rely on such translated amounts.

Attached Fact Sheet (results & analysis tables)

About Patni Computer Systems Ltd:

Patni Computer Systems Limited (BSE: PATNI COMPUT, NSE: PATNI, NYSE: PTI) is a global provider of IT Services and business solutions, servicing Global 2000 clients. Patni services its clients through its industry-focused practices, including banking, financial services and insurance (BFSI); manufacturing, retail and distribution (MRD); life sciences; communications, media and utilities (CMU), and its technology-focused practices.

With an employee strength of over 15,000; multiple global delivery centers spread across 11 cities worldwide; 23 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 663 million for the year 2007.

Patni’s service offerings include application development and maintenance, enterprise application solutions, business and technology consulting, product engineering services, infrastructure management services, customer interaction services & business process outsourcing, quality assurance and engineering services.

Committed to quality, Patni adds value to its clients’ businesses through well-established and structured methodologies, tools and techniques. Patni is an ISO 9001: 2000 certified and SEI-CMMI Level 5 (V 1.2) organization, assessed enterprise wide at P-CMM Level 3. In keeping with its focus on continuous process improvements, Patni adopts Six Sigma practices as an integral part of its quality and process frameworks.

Patni leverages its vast experience spanning three decades; deep domain expertise; full-spectrum services; and suites of IP-led solutions, methodologies and frameworks; in being an effective business transformation partner to its clients.

For more information on Patni, visit www.patni.com

IMPORTANT NOTE:

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, liability for damages on our service contracts, the success of the companies in which Patni has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

Media contact details

Gaurav Agarwal, Investor RElations,
Patni US,
+1-617-914-8360,
investors {at} patni(.)com

Gavin Desa, Investor Relations,
Citigate Dewe Rogerson India,
+91 (022) 4007 5037,
gavin {at} cdr-india(.)com

Heena Kanal, Media Relations,
Patni India,
+91 (022) 6693 0500,
heena.kanal {at} patni(.)com

Tony Viola, Media Relations,
Patni US,
+1-617-354-7424,
tony.viola {at} patni(.)com