Valuation

The acquisition will bring together two strong information

technology outsourcing companies with complementary industry
verticals and opportunities for sustained long-term growth. This
alliance will create a compelling go-to-market strategy with iGATEs
differentiated iTOPS (Integrated Technology and Operations) and
Outcomes based business model supported by Patnis delivery
expertise and focus on micro-verticals. The combination will elevate
I-GATE into the USD 1 billion plus revenue league and will facilitate
faster adoption of our iTOPS for Business Outcomes model.
The following synergies are expected from this acquisition:
Larger deals and more verticals.
Cross selling key solutions to a broader client base.
Enhancing ratios by leveraging the combined strengths.
Efficiency in operations and delivery services.
Economies of scale from consolidated shared services.

Valuation

Geographic revenue split:

PATNI REVENUES

IGATE REVENUES
In Millions of INR except
FY
Per Share
2011
12 Months Ending
Revenue
United States

201112-31

36,378
.2
100.0
24,010.
0
66.0

In Millions of INR except Per Share

12 Months Ending
Revenue by End User

FY 2011

2011-12-31
35,679.4

100.0

27,665.9

77.5

Europe

4,894.6

13.7

United States

Europe

4,590.6

12.6

Japan

1,182.0

3.3

Canada
Pacific Rim (principally
India)

5,343.0

14.7

Others

1,159.4

3.2

2,434.6

6.7

777.6

2.2

India

Valuation

Assumptions:

COGS : 48%

US, Europe and India form the common regions for both the firms and this
deal would reduce the existing COGS of the combined firm by 30%.

SG AND A : 48%

US, Europe and India form the common regions for both the firms and this
deal would reduce the existing SG and A of the combined firm by 48% as
only sales team would be impacted.

COGS growth rate

1-3 yrs : 33.00%, 3-10 yrs : 28% .

The reason for the rates is that IGATE has seen YoY COGS growth rate at
35%. With synergies the rate is assumed to fall down.

Depreciation : It is taken at a standard value of 29%.

Valuation : Company
Valuation
IGATE

WACC:

7.36% Terminal

1.900%

2009
2010
2011 2012(E) 2013(E) 2014(E) 2015(E) 2016(E) 2017(E) 2018(E) 2019(E) 2020 (E)
1486.88 2026.78 4265.35 5331.69 6664.61 7797.60 9123.19 10674.1 11528.0
13446.339 14387.5
FCF
9
2
5
4
7
2
4
4
7
12450.31
2
8
263524.

8
1486.88 2026.78 4265.35 5331.69 6664.61 7797.60 9123.19 10674.1 11528.0
13446.339 277912.

9
2
5
4
7
2
4
4
7
12450.31
2
3
190998.
Total Value
6

3.47270
IN USD billion
2

TERMIN
PATNI

AL
6.50% WACC: 17.18%

2012
2013
2014
2015
2016
2017
2020

2009
2010
2011
(E)
(E)
(E)
(E)
(E)
(E)
2018 (E) 2019 (E)
(E)
3317.06 3582.43
4178.55 4512.83 4873.86 5263.77 5684.87 6139.66 6630.83 7161.303 7734.20
FCF
9
5
3869.03
2
6
3
2
4
4
7
65
8
77152.8

3
3317.06 3582.43
4178.55 4512.83 4873.86 5263.77 5684.87 6139.66 6630.83 7161.303 84887.0

9
5
3869.03
2
6
3
2
4
4
7
65
4
42164.2
Total Value
6

IN USD
0.76662
billion
3

Valuation Combined firm

Total Combined Value

Synergy

Price to be paid for Patni

259900.6

26737.77
0.486141

in INR milions
in USD billions

1.252764

in USD billions

The actual deal happened at 1.22 billion $ USD or 5560 crore

INR.