Mumbai: Software firm Patni Computer will seek acquisitions in Europe and the Asia-Pacific to help lower its dependence on the US, an official said on Thursday, boosting shares to its highest since November 2007.
The company will look at targets in the range of $50 million-$200 million, chief financial officer Surjeet Singh told Reuters in an interview over the telephone.
“Having done the portfolio gap analysis now, we are also acquisitive as a firm. So, therefore, you will see inorganic activity as well,” Singh said after the New York-listed Patni Computer Systems Ltd reported June-quarter results.
“M&A (mergers and acquisitions) has always been a strong agenda. It is (a) much more strong agenda now and on all the dimensions ...to strengthen verticals, enhance scale of service lines and expand geographies.”
The company had $350 million in cash, which would be used to fund the acquisitions, he added.
“If it is a good acquisition, I don’t think size will be a barrier. We will go for it,” he said.
On the news, the shares extended gains to hit a near 20-month high of Rs344.35, up 18.3%, before easing to Rs333.10, up 14.4% at 1:32 pm.
The acquisitions should enable Patni to raise, in 2-3 years, the revenue share of Europe to about 30% from 15-17% last year and that of Asia-Pacific to 10% from 5.6%, he added.
Last year, Patni derived about three-fourths of its revenue from the United States.
Shallow Growth Visibility
For the second quarter ended June, Patni’s net profit rose 19% to $28.7 million on cost controls and positive currency moves but forecast lower revenue and net profit for the September quarter as growth prospects continue to be pressured.
“The visibility of growth is still shallow. Our view has not changed that it may take up to second half of 2010 for us to gain a higher-better visibility,” Singh said on the call.
For the September quarter, Patni forecast net profit before hedging gains-losses at $22.5-$23.5 million, on revenue of $163-165 million, assuming constant rupee-dollar rate of Rs48.50. In the year-ago quarter, Patni reported a net profit of $43.1 million on revenue of $183.5 million.
“The trend is still the same, which is that the structural growth is still away from us. The clients are still cautious. Cost pressures do continue and that is all pervasive across geographies and verticals.”
Larger rivals Infosys, Tata Consultancy and Wipro have reported market-beating quarterly profits but have warned of a challenging business environment.
After a scorching pace of growth for years, India’s export-led outsourcing sector has been battling a slowdown over the past year as global customers struggled to stay afloat, went bust or tackled severe cost cuts, halting technology spending.
“I continue to think that the market will still take time to recover systemically. However, it is still better than where we were in Feb-March,” Singh said. “The decline has stopped. If there is longer stability, it should lead to structural improvements.”