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Patni Computer (It could have been better, ADD):
The lacklustre premium associated with the offer price (8% to CMP) gives little incentive to own Patni now. With little differentiation in service lines, we don’t see Patni benefiting much from an expanded scope and hence growth rates are unlikely to improve in the medium term. It is an acquisition for scale, and iGate remains the primary beneficiary. An eventual merger can make the larger entity eligible for bigger RFPs, but in the interim, integration is a challenge. Given the similarity in service lines and geographies, we expect senior management attrition. That said, Patni continues to be cheap at 12x CY12ii EPS and a possibility of delisting of Indian shares following an open offer could provide an upside. As such, we retain ADD on Patni, but we reiterate our preference for Infosys and HCL Tech. Among mid-cap IT firms, we prefer Infotech Enterprises and Infinite Computers.
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