Patni Computer System: Trying to De-risk

This is crucial to the company. Its traditional dependence on General Electric has only grown over the years. The 13 year old relationship now accounts for $100 m of the company's revenues (up from $75 mn last year). That is a good 37% of the top line. Combined with State Farm Insurance, its top two clients account for 60% of their business. The top five account for 70% of revenues. In addition, as a result of GE and SFI, the company has also been restricted to two verticals-BFSI and manufacturing-that get in nearly 80% of revenues; and one geography-the US-that accounts for 89% of the topline. Every which way you see it, that is too many eggs in one basket. Especially given GE's reputation for pushing hard. One of the indicators-net profits as a percentage of revenue decreased from 19% to 17% even as most of the rest of the sector saw these figures climb. 

So while the company does not plan to break away from its key verticals where it already has a proven skill set, it needs to start looking at other customers. Some of this effort has been visible over the last fiscal. Patni doubled its sales and marketing workforce from 70 to 141 during the calendar year 2003 and its SG&A expenses jumped 32% from $41.4 mn to $64.5mn. There were also supply side pressures. In the quarter ended March 31, 2003 its attrition rate stood at about 16%. It jumped drastically to 27% by September end. Reason-it was losing people to the big 5 and to the MNC IDCs. Patni battled that with rationalization of salaries and an across the board salary hike. Whether that paid off is yet to be seen.