PROJECT

Team Members
Raj
Dani

Bhavik
Shah

Priyanka
Bhayani

Ankit
Pai

Tirupathi
Sabbu

iGATE acquires majority stake in Patni Computers

Marking the biggest merger of the India information technology (IT) industry, Nasdaq-listed iGate in May both companies will continue as listed The new management of iGate said 2011, announced the completion of Patni Computer Systems meger and revamping of the top leadership will be entities in their respective exchanges while the market-facing activity done by a single brand to be known as iGate Patni. Management of the iGATE now holds an approximate the name Patni will bein Patni the brand as companies were of opinion that stake of 84.5 percent part of computers, now called iGate bridge between clients. The combined entity will now have it will act as a Patni. Reconstituting the Patni a client retains 4 senior executives in the executive 26,000 employees with board; base of 360. council; iGate Patni to be the new brand identity.

Acquirers Seller

Pan-Asia iGATE Solutions, Mauritius and iGATE Global Solutions Limited Promoter Group of Patni and General Atlantic Mauritius Limited (GA) In accordance with the prevailing norms, as iGate was not willing to pay non-compete fees as part of the deal , it made a mandatory 20% open 0ffer to Patnis Shareholders at same price of Rs. 503 per share and was reported to be fully successful.

Acquisition Igate acquired a 63.38% (45.88 from patni promoters, 17.5% from the General Atlantic) stake in Patni at Rs. 503 per share, paying a premium of 5.53% over the Patnis closing stock of Rs. 463.65 on.

Total Rs 5530.87 crore Considerati on Mode of Funding Combination of balance sheet cash, debt and fresh equity issuance

DEAL DETAILS

BUSINESS MODEL
Service offerings span the entire software services lifecycle including:
application development and integration, application maintenance, enterprise application systems e-Business enterprise systems management research and development services business process outsourcing.

CLIENTS
Largest client, the GE Group Second largest client, State Farm Insurance The Guardian Life Insurance Company of America (Guardian Life Insurance), Hitachi Group

HP
Pitney Bowes Southern California Edison

IGATE BUSINESS MODEL

The company focuses more on productivity, quality, and knowledge management. Some of the services offered are : Technology Consultancy

Application Development and Maintenance

Data Analytics Independent Verification and Validation Infrastructure Management Services

FINANCIAL CONSIDERATIONS
SOURCE OF FUNDING THE ACQUISITION
Internal Accruals : Cash balance on balance sheet of iGate at the time of deal Rs. 450 Cr. Further, the funding of the whole merger is precisely explained with the below diagram.

Open offer to Patnis Shareholders at Rs. 503 per share

Particulars The average of the high and low of the closing prices for every week for the last 26-weeks prior to the date of the PA on NSE INR 467.94

The average of the daily high and low of the intra-day trading prices for the last 2weeks prior to the date of the PA on NSE
The negotiated price

471.28

503.50

REVENUE MODEL
It has set a target of getting 30% of the combined entity's revenues from an outcome-based model by 2017-CFO Time and material contractPaid based on the cost of labour and material used Clients are usually billed on a per hour basis The merged entity will have a two $100 million (annual revenue generating) clients and two $50 million clients other than 36 clients who fetch a revenue of $5 million per annum.

THE DEAL A WIN-WIN FOR PATNI AND iGATE

PATNI IS THE SIXTH LARGEST SOFTWARE IN INDIA KEY PLAYER ACCROSS BANKING & FINANCIAL SERVICES,INSURENCE, MANUFACTURING, RETAIL, & MEDIA & ENTERTAINMENT REVENUE OF THE COMBINED ENTITY RS. 42345 CR HELP IGATE TO PITCH BIGGER AND LARGER BUSINESS DEALS

Current Scenario for iGate

iGate's net profit dropped 47.3% to $12.1 million during the second quarter ended June,12 compared to $24.1 million in the preceding (March,12) quarter. The software company's revenue increased marginally by 1.78% to $268 million in the same period. iGate CEO Phaneesh Murthy said the profit decline was on account of salary increase and abnormally high visa costs. These reduced the company's gross margin to 37.4% from 40.2% in the March quarter. "We announced a 10% salary increase in April, 12 which hit our margins by 2.4 percentage points. We also had a forex loss of $17 million on account of hedging. The visa cost is a one-time event. We expect margins to improve going forward," he said.

Current Scenario for iGate

He said the anti-outsourcing rhetoric in the US was a bit of a concern and company had seen no signs of business in Europe over the last 6 months. , but expressed confidence that IT spending would pick up. The advantage here is that iGate had acquired Mumbai-based Patni Computer last year, and the combined entity has an annualized run rate of $1 billion in revenue. iGate is headquartered in the US, but has most of its delivery operations in India.

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