Patni Computer Systems

Patni Computer Systems (Patni) reported 16% sequential growth in revenues to Rs 1009.19 crore for the fourth quarter ended December 2011.

Operating margins jumped by 580bps to 21.8% on the back of substantial decline in staff costs due to severance costs of Rs 59.42 crore in Q3 on account of termination of services of some employees as a result of acquisition with the resulting operating profits was up 57% to Rs 219.56 crore. Other income rose, Depreciation charges remained flat and Interest costs were credit against debit, PBT thus grew 78% to Rs 225.49 crore. Tax rate was a mere 11.12% against 28.55% which further boosted Net profit level which stood 122% higher at Rs 200.42 crore.

On a corresponding basis, consolidated operating revenues were up 16%. Operating margins were flat at 21.8% as staff costs decline was compensated by similar increase in S, G&A expenses and the resultant operating profit grew 16%. Bottomline was up 15% due to higher other income but marred by increase in tax rate from 1.55% to 11.12%.

During CY11, revenues grew 9% to Rs 3627.89 crore, OPM crashed by 560 bps to 17% on the back of increase in staff costs and S, G&A expenses, resultant operating profit was down 18% to Rs 617.7 crore. EO expense of Rs 89.18 crore which includes impairment of intangibles against nil saw PBT after EO further down by 31% to Rs 489.11 crore. Tax expense fell 15% to Rs 71.55 crore at effective tax rate at 12.37%, up 53bps. PAT was thus down 33% to Rs 417.56 crore and after considering prior period expense of Rs 16.1 crore against nil, resultant net profit was down by 33% to Rs 401.46 crore.

Sequential Performance (Indian GAAP)

For the quarter ended December 2011, Patni posted 16% sequential growth in its operating revenues to Rs 1009.19 crore.

Operating margins rose by 580bps to 21.8% on the back of substantial decline in staff costs due to severance costs of Rs 59.42 crore in Q3 on account of termination of services of some employees as a result of acquisition. As % of sales, staff costs decreased 793bps to 51.61% but S, G&A expenses rose by 219bps to 26.63%. The resultant operating profit was up 57% to Rs 219.56 crore. The net other income was up 75% to Rs 39.47 crore, PBT was up 78% to Rs 225.49 crore due to flat depreciation charges at Rs 34.19 crore and Interest income of Rs 0.65 crore against expense of Rs 1.58 crore, albeit on a lower base.

Tax provisioning was down 30% to Rs 25.07 crore at effective tax rate of 11.12% against 28.55% further improved the profit at Net profit level which stood at profit of Rs 200.42 crore, up 122%.

On Y-o-Y basis, consolidated revenues were up 16% to Rs 1009.19 crore. Operating margins were flat at 21.8% largely impacted by 562bps increase in S, G&A expenses to 26.63% of sales but negated by 562bps decline in Staff expenses 51.61% of sales. The resultant operating profit grew 16% to Rs 219.56 crore.

Other income (net) was up by 105% to Rs 39.47 crore, depreciation charges rose 17% to Rs 34.19 crore but Interest income of Rs 0.65 crore against expense of Rs 1.02 crore resulted in 27% rise in PBT to Rs 225.49 crore. Tax provisioning stood at Rs 25.07 crore against Rs 2.75 crore, at effective tax rate of 11.12% against 1.55% decelerated the rise at Net profit level which stood at Rs 200.42 crore, up 15%.

Patni has reported 9% growth in revenues to Rs 3627.89 crore for the year ended December 2011, OPM crashed by 560 bps to 17% on the back of 336bps increase in staff costs to 60.14% of sales and 218bps increase in S,G&A expenses to 22.84% of sales, resultant operating profit was down 18% to Rs 617.7 crore.

Other income was up 27% to Rs 100.05 crore and while Depreciation charges were up 15% to Rs 136.78 crore, Interest expense was down 44% to Rs 2.68 crore which saw the PBT before EO de-grow 18% to Rs 578.29 crore. EO expense of Rs 89.18 crore which includes impairment of intangibles against nil saw PBT after EO further down by 31% to Rs 489.11 crore.

Tax expense fell 15% to Rs 71.55 crore at effective tax rate at 12.37%, up 53bps. PAT was thus down 33% to Rs 417.56 crore and after considering prior period expense of Rs 16.1 crore against nil, resultant net profit was down by 33% to Rs 401.46 crore.

Management Comments:

With the integration in place and benefits of a single combined entity beginning to take shape, we have made significant savings in terms of costs during the year, to the extent of approximately $32 million. The depreciation of the rupee also had a positive impact of approximately a 3% on the Company's profitability in the fourth quarter. The rupee volatility is a concern in the longer run; however, in 2012 we will continue to sustain the benefits of our successful integration.

Valuation

The shares of Patni Computer closed at Rs 477.95 (closing on 25^th January 2012) on BSE, which discounts the quarterly annualized adjusted EPS of Rs 59.6 by 8.02 times.

Patni: Consolidated results (Indian GAAP)