Mumbai: Indian software services firm Patni Computer Systems Ltd is evaluating two to three companies in Europe and Asia Pacific for acquisitions, its chief financial officer said on Thursday.
“There are 2-3 companies we are evaluating at this point in time. There were two companies we evaluated last quarter, did not like the fit and so passed on,” Surjeet Singh told Reuters in an interview.
“M&A is a very integral part of the business. We want to fill our portfolio gap. We want to extend our coverage.”
The valuation expectations from target companies had gone up because of the current buoyancy in the market conditions, he said. “Our sweet spot would be companies with revenue of $75 million to $250 million,” he said.
Patni has almost $500 million in cash, which would be used to fund any buys, Singh said after the firm posted a estimate beating net profit of Rs157 crore, more than double from a year earlier, aided by forex gains and cost controls.
It also forecast a net profit of $27 million to $28 million for the second quarter ending June, 2.4%-5.% lower from a year ago.
Revenue, however, is likely to be up 5.6-6.2% at $171 million to $172 million as the deal flow improves.
Patni’s robust results and outlook tracks strong performances at larger rivals Tata Consultancy Services, Infosys and Wipro, cementing hopes of an accelerated recovery in India’s $60-billion showpiece software sector.
New York-listed Patni, the erstwhile employer of the founders of India’s No. 2 software services firm Infosys Technologies, is bullish on the deal pipeline, Singh said.
Earlier this week, Patni baggeed a multi-million dollar 5-year IT and back-office services deal from Universal American Corp, a US-based health insurance provider.
“US is doing okay. Europe is a little bit behind, in recovery mode if you will. Asia Pacific- we have made investments last year and there are some deals in the pipeline already.”
Patni gets 80% of its revenue from the US, 14% from Europe and the middle east and the rest from Asia Pacific regions.
India’s $60 billion outsourcing sector is betting on overseas clients loosening their purse strings this year in a global technology sector recovery that has helped IBM, Microsoft and Intel report strong results.
Patni is planning to hire 2,000-3,000 people, 75% of them fresh off campus, in 2010, Singh said adding most of them would be hired over the second and third quarters.