Patni board approves buyback of shares
Facing pressure from a stronger rupee and a slowdown in the US economy, Mumbai-based Patni Computer Systems has posted a 71.8 per cent increase in net profit at Rs 449.18 crore for the year ended December 2007, compared with Rs 261.36 crore in the previous year, marginally beating market expectations.
However, the company reported a 12 per cent drop in profits for the December quarter and posted Rs 99.72 crore as compared with the September quarter when the company posted revenues of Rs 109.72 crore. The company posted revenues of Rs 690 crore for December 2007, marginally up Rs 680 crore that it posted a year earlier.
Further, the board has approved buyback worth Rs 237 crore at a maximum of Rs 325 per share. This would be about 5 per cent of the company's total equity base. The company has also decided to re-price outstanding employee stock options (ESOPs) at market price. ESOPs are given at a price determined by the company to retain its employees.
The dip in quarterly profits is primarily due to an appreciating rupee and clients not willing to come in at higher billing rates, according to industry observers.
Commenting on the results and the outlook going forward, Narendra K. Patni, Chairman and CEO, Patni Computer Systems said, "Overall as the market dynamics are changing, including our customer mix , and we remain confident about our business momentum and continue to further expand the focus on improving internal efficiencies."
Analysts see this move by the Patni management as the only positive sign towards its stakeholders. "This signals growth especially in the light of an appreciating rupee and a slowdown in the US economy, which have hurt the company's quarterly net profits," said an IT analyst from a Mumbai-based brokerage house.
The rupee has appreciated 12 per cent since last year and Indian IT firms who get about 70 per cent revenues from the US market could be hit by a slowdown in tech spending. Patni gets in excess of 70 per cent from the US.
"While there is a talk of slowdown in the US markets, we are confident that cost-cutting by US companies would result in more outsourcing coming our way," Patni CFO Surjeet Singh told Hindustan Times.
On the current outsourcing environment in the US, Singh said: ‘While we are cautiously looking at the overall scenario and we are ready to take whatever measures needed to maintain profitability.”