Patni seeks buyouts for Europe spread

Patni Computers Systems is scouting for acquisitions in Europe to expand its business in the continent.

The company has identified the UK, Germany, Sweden and France as possible locations for strategic acquisitions.

Patni currently operates six offshore development centres in India and three onsite development centres in the US, Germany and UK.

Currently 89 per cent of Patni's revenues come from clients based in the US and Europe accounts for seven per cent of its revenues.

"We are looking at the inorganic channel for growth in the future. But we will go ahead with an acquisition only if it brings in strong industry expertise, service offering capabilities and geographical advantage," said N K Patni, chairman and chief operating officer, Patni Computer Systems.

The company will utilise a sizable portion of the revenues from its initial public offering for its future acquisitions.

The company has set up a separate team to identify opportunities for acquisitions and it has already initiated talks with some small companies in different verticals.

Patni flagged off its acquisition drive by taking over a Boston-based financial services company, The Reference, for Rs 45.45 crore last year.

Patni is also in the process of setting up a near-shore development centre in Canada which will act as a disaster recovery centre for its US-based clients.

Even as it is exploring the acquisition route for growth, Patni is keen on reducing the volume of work done onsite.

At present onsite projects account for 65 per cent of its total revenues. Patni has already recorded a revenue of Rs 823 crore and a profit of Rs 127 crore in the first nine months of 2003.

Patni's operating margins slipped in the April-September 2003 period owing to acquisition cost write-offs and salary hikes.

Margins are expected to return to the 15-17 per cent range in the September-December quarter.

The company is also working towards reducing its dependence on various GE projects which at present account for 42 per cent of its revenues.

The company is looking at diversifying its business into newer verticals in a bid to woo non-GE clients.

Patni's IPO will be open for bidding from January 27 till February 5. The company will make an issue of 18.7 million shares, of which 13.4 million shares will be a fresh issue and 5.32 million shares will be the portion sold by existing shareholders.The price band for the open offer is between Rs 200-Rs 230 (Rs 2).

After the issue, the holding of Patni's founders will come down from 60.8 per cent to 51.3 per cent.