Patni getting back on track

(By Anthony Miller – Thursday 30th July 2009 2:30pm). I thought it was a more mature, and subdued tone from Patni management on today’s 2Q09 concall – and I took some comfort from that. It’s been a while since I last tuned in to a Patni call as, frankly, I thought they’d have trouble getting back on track after much turbulence in recent times. But it does seem that back on track is where they are, with the best operating margin (15%) for a few quarters. OK, this is not in the same league as the India-based Tier-1 players like TCS, Infosys and Wipro, but it is appropriate for their size, with some $680m in revenues over the past 12 months. Management expects them to be able to hold this margin level within 100-150 bps, currencies permitting.

Patni is still very small in the UK. When I spoke to management today, they said that the UK makes up about 70% of their European revenues, which I reckon puts them on a run rate of some £40-45m p.a. Europe has been declining in the mix of late, and is now 14% of total revenues. Indeed Europe was flat at constant currency, prompting CEO Jeya Jumar to comment “Europe has been stable for too long"! But I think they will find it hard to make serious headway in the UK and Continental Europe through lack of scale, though they have won some decent deals here (see Patni scores new contract with Bupa).

One thing did stand out on the call today. Patni was the first India-based player I heard talk about its Cloud strategy other than to say they have one. Patni was more specific. They are building cloud ‘frameworks’, not to offer ASP/SaaS applications, but as an integral part of their AM offering, i.e. to help clients move legacy apps to ‘the Cloud’ or from one cloud to another. Early days, of course. They have fewer than five clients in pilots for now, but the fact that they are actually doing something is I think quite far-seeing. I will certainly get back on track myself with Patni as it’s starting to sound interesting again.