Highlights of the call
- The Company’s outlook under US GAAP Consolidated for the quarter ending March 2009 is as follows: Consolidated revenue expected to be US$ 154 – 155 million q-o-q de-growth of 12.1 – 12.7% and net profit (excluding the foreign exchange gain/loss) for the same period expected to be in the range of US$ 13.5 –14.5 million i.e. a de-growth of 49.4 – 52.9% q-o-q, at an exchange rate of Rs 48.5/US$ and constant GBP-USD rate of 1.45, Euro-USD rate of 1.31.
- Mark to Market Forex loss during Q1FY2009 is expected to be in the range of US$ 7 million based on current estimates. This may change depending on further currency movements during the quarter and will impact Net Earnings accordingly.
- The dip in revenues of 12.1 – 12.7%: 2-3% is due to seasonality, 2.5-3% on pricing pressure and 7-7.5% on volume dip due to current economic environment.
- The net profit margin to 8.8 – 9.4% down from 16.3% in the sequential quarter excluding forex gain/loss: 2% on pricing pressure, 1.5% on immigration and visa costs, 15% on lower utilization and 3% on lower volume and absorption.
- The management is seeing cut in IT spent, volume and pricing pressure, increasing offshoring, the impact is across industries, the pipeline is building but sales cycle is longer and that things may get worst before getting better.
- The management is seeing cancellation and non-renewals. There is pricing pressure.
- There would not be wage expansion like earlier years going forward. There would be performance based increase.
- The forex hedges at the end of the quarter stood at US$ 395 million at Rs 42-51/US$. The OCI balance in the balance sheet would be US$ 28-30 million of which US$ 7-8 million are long-term post 2012.
- Cash & Cash Equivalents at the end of the quarter stood at US$ 60.1 million and investment in mutual funds at US$ 243.5 million. 35% of mutual fund investment is in FMP with no exposure to real estate.
- Number of active clients relationships was decreased to 331 during the quarter as compared 332 in sequential quarter. The number of million-dollar relationships increased to 92 as compared 91 in sequential quarter. During the quarter, Patni acquired 18 new clients.
- In US dollar terms, Top client contribution grew 1% in absolute terms at 11%, top 2-5 client contribution grew 1.5% at 23.6%, top 6-10 client contribution grew 9.6% at 14.1% and others dipped 9.6% at 51.3%.
- During quarter under review, offshore efforts contribution was down 50bps at 71.3% as in the sequential quarter and higher as against 70.3% in the corresponding quarter previous year. Offshore contributed 41.4% of revenues down from 42% in the sequential quarter.
- Utilization was down at 73.1% in quarter under review as compared to 75% in sequential quarter. The Attrition excluding BPO was 18.6% against sequentially 20.2%.
- During quarter ended December 2008, in US dollar terms, U.S. revenues were lower by 1.2% sequentially contributing 78.6%. Revenues from EMEA and APAC decreased 14.4% at 15.6% and decreased 2.8% at 5.9% sequentially. Europe is flat on constant currency.
- During the quarter, in US dollar terms, revenues from insurance grew 4% at 27.1% whereas manufacturing dipped 4% contributing 25.4%, Communication, Media & Entertainment contribution dipped 22.1% at 10.1%, financial services dipped 0.6% contributing 12.9%, growth industries 6.8% contributing 8.9% and product engineering dipped 1.1% contributing 15.6% compared to the sequential quarter. The company does not have any direct impact of the BFSI meltdown. Dip in Telecom is due to cross currency headwinds and it is quarterly aberration.
- In service lines, in US dollar terms, Product engineering grew 0.6% contributing 11.3%, IMS grew 2.1% contributing 5% and BPO grew 3.4% contributing 5.6% whereas ADM dipped 3.1% contributing 64.6%, package implementation dipped 13.4% contributing 13.5%, sequentially. ADM down due to cut in discretionary spent.
- During quarter, revenues from fixed price contracts contributed 37.8% to overall revenues as compared to 36.8% in sequential quarter and 34% in corresponding quarter previous year.
- Patni reduced 51 employees net during the quarter with total headcount 14894 employees. The Company had made 1800 campus offers for CY08, of which 1100 offers have been processed and the balance would be done in the next 2-3 months. The lateral hiring would be hire on demand.