Date of report Wednesday, May 07, 2008

Company Patni Computer Systems Limited - Quick & Dirty Analysis

Analyst Dhananjayan J

Contact dhanan12@yahoo.com, dhananjayan.dj@gmail.com

Dirty Analysis
Table of Contents (Please enable the macro attached to this file)

Fact Sheet >>

Quick & Dirty Analysis >>

Segment >>

Disclaimer >>
Fact Sheet

Patni Computer Systems Ltd

Patni Computer Systems Limited (Patni) is primarily engaged in the business of information technology 599(IT)
549
consulting and software development. Most of the business of Patni is subcontracted from its subsidiary
companies in the United States, United Kingdom and Germany. The Company provides multiple 499 service
offerings to its clients across various industries comprising financial services, manufacturing companies
449and
others, such as energy and utilities, telecom, retail and hospitality companies. The various service offerings
399
comprise application development and maintenance, enterprise application systems, enterprise 349 system
management, research and development services and business process outsourcing. 299
249
199
Website http://www.patni.com/ 4 71 1 R R R R R R
/ / 0/ o o o o o o
Special situation Buyback 22/ 2w ww ww w

Pro forma valuation

Price ratio
Price to earnings 7.3
Price to free cash flow 21.1
Price to tangible book value 1.5

Enterprise value ratio

EV / Sales 0.9
EV / EBITDA 4.5
EV / EBIT 5.5
EV / (EBITDA-Capex) 10.8

Debt and interest coverage

Net Debt / EBITDA NA
EBIT / Interest expense 30.1

Yield Ratio
Dividend yield 1.1%
Earnings yield 10.1%
FCF1 yield 3.9%

Return on Assets
Return on operating assets 25.7%
Return on capital invested 43.2%

Operating margins
EBITDA 20.5%
EBIT 16.7%
Net income 13.3%

Depreciation Vs. Capex Capex

The above valuation ratios are computed after assuming buyback in the LTM financial numbers published by the company.
(Refer QAD sheet)

Conclusion
Buyback announced by the company does not provide any room for further valuation. The operating margin have come
compared to Q107 as well as whole fiscal year 2007. This is inspite of some marginal gain in FOREX - INR Vs. US Dollar. No
margin decline can be recouped in remaining 3 quarters of 2008. In our opinion, we believe that it is very difficult as 80% of re
Capex is more than depreciation. So we believe that the buyback announced by the company won't change the current valuatio
Buyback announced by the company does not provide any room for further valuation. The operating margin have come
compared to Q107 as well as whole fiscal year 2007. This is inspite of some marginal gain in FOREX - INR Vs. US Dollar. No
margin decline can be recouped in remaining 3 quarters of 2008. In our opinion, we believe that it is very difficult as 80% of re
Capex is more than depreciation. So we believe that the buyback announced by the company won't change the current valuatio

Our Verdict: Overvalued - avoid.

 599
549
499
449
399
349
299
249
199
4 71 1 R R R R R R R R R R R R R R R R R R R R R R R R
/ / 0/ o o o o o o o o o o o o o o o o o o o o o o o o
22/ 2w ww ww ww ww ww ww ww ww ww ww ww w

rating margin have come down by 6% in Q108 when

X - INR Vs. US Dollar. Now the question is whether this
very difficult as 80% of revenue is from USA. Moreover
hange the current valuation of the stock.
QUICK & DIRTY ANALYSIS
(Amt in '000)
Patni Computer Systems Limited 3M 3/07 2007 3M 3/08
Revenue 6,796,257.00 26,911,455.00 6,933,510.00
Growth 2.0%
Other income 365,019.00 895,934.00 180,372.00
Personnel costs 3,706,781.00 15,389,630.00 4,072,655.00
Selling, general & administrative costs 1,643,911.00 6,235,334.00 1,881,406.10
EBITDA 1,810,584.00 6,182,425.00 1,159,820.90
Margin 26.6% 23.0% 16.7%
Depreciation & amortization 176,279.00 984,757.00 193,896.90
EBIT 1,634,305.00 5,197,668.00 965,924.00
Margin 24.0% 19.3% 13.9%
Interest expenses 30,553.00 147,225.00 33,988.00
Interest income 516,125.00
EBT 1,603,752.00 5,566,568.00 931,936.00
Margin 23.6% 20.7% 13.4%
Tax @ 25% 400,938.00 1,391,642.00 232,984.00
Net income 1,202,814.00 4,174,926.00 698,952.00
Margin 17.7% 15.5% 10.1%
Outstanding shares 139,030.30 139,030.30 139,030.30
EPS INR 8.65 INR 30.03 INR 5.03
Adjusted EPS

Non recurring items

Non recurring income
Provision for decline in the fair value of investment 13.00
Profit on sale of fixed assets 11,959.00
Profit on sale of non trade investments 266,043.00

Total assets
Goodwill
Cash
Deferred tax assets
Investments - cash equivalents
Operating assets
Return on operating assets

Fixed assets
Current assets excl cash
Current liabilities excl debt
Capital employed
Return on capital employed

Cash
Debt
Shareholder's equity - book value
Tangible Book Value (TBV)
TBV/share
Capex (net) 792,789.00 3,350,519.00 660,130.00
Notional FCF1 (before investment in working capital)
FCF1/share
Adj FCF1/share

Price
Mcap
EV
Adj Mcap

EV/Sales
EV/EBITDA
EV/EBIT
EV/(EBITDA-Capex)

PE
P/FCF1
P/TBV

Adj PE
Adj P/FCF1

Net debt/EBITDA
EBIT/Interest expense

Dividend per share INR 3.00

Dividend yield
Earnings yield
Notional FCF1 yield
LTM 3/08 Buyback Pro forma 3/08
27,048,708.00 27,048,708.00

711,287.00 711,287.00
15,755,504.00 15,755,504.00
6,472,829.10 6,472,829.10
5,531,661.90 5,531,661.90
20.5% 20.5%
1,002,374.90 1,002,374.90
4,529,287.00 4,529,287.00
16.7% 16.7%
150,660.00 150,660.00
516,125.00 431,673.28
4,894,752.00 4,810,300.28
18.1% 17.8%
1,223,688.00 1,202,575.07
3,671,064.00 3,607,725.21
13.6% 13.3%
139,061.00 7,292.31 131,768.69
INR 26.40 INR 27.38
INR 24.43 INR 25.78

35,345,911.00 35,345,911.00
4,329,992.00 4,329,992.00
1,564,329.00 1,564,329.00
601,814.00 601,814.00
11,204,083.00 11,204,083.00
17,645,693.00 17,645,693.00
25.7% 25.7%

8,791,635.00 8,791,635.00
8,854,058.00 8,854,058.00
7,163,890.00 7,163,890.00
10,481,803.00 10,481,803.00
43.2% 43.2%

12,768,412.00 1,976,580.08 10,791,831.92

22,462.00 22,462.00
28,121,773.00 28,121,773.00
23,791,781.00 23,791,781.00
INR 171.09 INR 180.56
3,217,860.00 3,217,860.00
1,455,578.90 1,392,240.11
INR 10.47 INR 10.57
INR 8.50 INR 8.97

INR 271.05 INR 271.05

37,692,484.05 35,715,903.97
24,946,534.05 24,946,534.05
INR 179.39 INR 189.32

0.9 0.9
4.5 4.5
5.5 5.5
10.8 10.8

10.3 9.9
25.9 25.7
1.6 1.5

7.3 7.3
21.1 21.1

NA NA
30.1 30.1

INR 3.00 INR 3.00

1.1% 1.1%
9.7% 10.1%
3.9% 3.9%
Segment
(Amt in '000)
2005 2006 2007
BUSINESS SEGMENT - REVENUE
Financial services 3,186,119.00 3,990,401.00 3,843,033.00
Growth 25.2% -3.7%
% on total sales 16.0% 15.3% 14.3%
Insurance services 5,502,080.00 6,069,215.00 6,417,048.00
Growth 10.3% 5.7%
% on total sales 27.7% 23.3% 23.8%
Manufacturing 4,350,112.00 5,654,475.00 6,353,002.00
Growth 30.0% 12.4%
% on total sales 21.9% 21.7% 23.6%
Telecom 3,047,015.00 4,907,273.00 3,602,481.00
Growth 61.1% -26.6%
% on total sales 15.3% 18.8% 13.4%
Independent software 2,479,501.00 3,696,498.00 4,503,217.00
Growth 49.1% 21.8%
% on total sales 12.5% 14.2% 16.7%
Others 1,304,479.00 1,762,396.00 2,192,674.00
Growth 35.1% 24.4%
% on total sales 6.6% 6.8% 8.1%
Total revenue 19,869,306.00 26,080,258.00 26,911,455.00
Total growth 31.3% 3.2%

GEOGRAPHICAL SEGMENT - REVENUE

USA 16,844,953.00 21,072,892.00 20,995,529.00
Growth 25.1% -0.4%
% on total sales 84.8% 80.8% 78.0%
Europe 1,807,755.00 3,036,604.00 3,937,050.00
Growth 68.0% 29.7%
% on total sales 9.1% 11.6% 14.6%
Japan 855,341.00 975,536.00 814,098.00
Growth 14.1% -16.5%
% on total sales 4.3% 3.7% 3.0%
India 63,157.00 106,859.00 219,475.00
Growth 69.2% 105.4%
% on total sales 0.3% 0.4% 0.8%
Others 298,100.00 888,367.00 945,303.00
Growth 198.0% 6.4%
% on total sales 1.5% 3.4% 3.5%
Total revenue 19,869,306.00 26,080,258.00 26,911,455.00
Total growth 31.3% 3.2%
Disclaimer

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