Annual Report | 2009

Evolving
like never before
Contents
Highlights of Achievements: 2009 02 03 Chairman’s Quote 04
Key Performance Indicators: 2004-09

Letter to Shareholders 05 Evolving Like Never Before 10 Directors’ Report 16 Corporate Governance Report 27

Standalone Financials under Indian GAAP 45 Management’s Discussion and Analysis of Consolidated Financials

under Indian GAAP 84 Consolidated Financials under Indian GAAP 91 Reconciliation of Significant Differences

between Indian GAAP and US GAAP 123 Management’s Discussion and Analysis of Consolidated Financials under

US GAAP 124 Consolidated Financials under US GAAP 129 Ratios as per US GAAP 158

Risk Management 159 Patni World-wide 164 Corporate Information 167

The theory of evolution has its parallels even in the corporate world. As was
eminently relevant with the evolution of biological species, ‘survival of the fittest’
finds similar context in the world of business. Being fittest, after all, is about the
ability to evolve and adapt to constantly changing stimuli.

We at Patni have always been cognizant of the fact that constantly changing
markets merit a culture of organizational evolution. In the aftermath of an
unprecedented meltdown, global and domestic markets as well as the
competition landscape have undergone a sea change. We are focused on the fact
that to grow in such a volatile environment, we need to undergo a DNA change;
treasuring our legacy while excited about the future.

Accordingly, we have embarked on an evolutionary path to provoke change in our

strategy, structure, systems, skills and culture.

Four critical vectors have been identified as the very vortices of this evolution…

Geographical expansion – venturing further afield into global markets.

Micro-vertical leadership – pursuing IP-led domain solution portfolio expansion.

Operational excellence – towards creating an agile, innovative and efficient

organization, and…

‘Great-place-to-work’ practices – driven by the desire to be a great brand to

work with.

In the process of evolution lies the potential for an infinite growth curve.
In order to continue delivering value to every class of stakeholders, Patni is
evolving like never before.
Highlights of achievements: 2009

2009 was a year of great economic challenges, changes and providing application life-cycle services around its Job
new opportunities. Even as we waded through the difficult Management Partner 1 (JP1) suite – a next-generation
times, Patni found its path to success by aligning, business-level system management solution.
accelerating and achieving a very creditable performance. We
worked aggressively to realign our overall operations and Awards and Recognitions
leverage the changing times to build sustainable competitive Ranked 40th amongst the ‘top technology providers for
advantage in our business. financial institutions’ in the ‘FinTech 100 - 2009’ list.
Overall revenues for CY 2009 were at US$ 655.9 million, Listed in the ‘Global Services 100 – 2009’, instituted by
down 8.8% as compared to US$ 718.9 in CY 2008. Net Global Services and neoIT:
income adjusted for extra ordinary items was at US$ 97.4
Ranked 7th among ‘Top 10 best performing IT
million for the year, higher by 17.0% against US$ 83.2
Infrastructure Service Providers’
million for 2008.
Ranked 8th among ‘Top 10 best performing IT Service
Acquired 56 new clients in the year, taking our total
Providers’.
number of active clients to 272; during the year we
rationalized our client portfolio to remain focused on Named a ‘Niche Player’ in Gartner’s Magic Quadrant for
growth and productivity. The number of $1 million client CRM Service Providers, North America, 2009 Report.
relationship remained unchanged at 92, despite the
Named a ‘Challenger’ in Gartner’s Magic Quadrant for Help
economic meltdown. Percentage of repeat business
Desk Outsourcing, North America, 2009 Report.
continued to be stable at 94.0% for CY 2009.
Listed among the Top 20 India-Centric BPO players in
Opened our new EMEA headquarters to drive growth for
‘Competitive Landscape: Business Process Outsourcing,
outsourced IT and BPO services. We also opened a new
India – 2009’, by Gartner.
regional office and delivery center in Singapore which will
serve as headquarters for our APAC operations. Listed in the ‘Black Book of Outsourcing – 2009’:

Launched a Cloud Acceleration Program (CAP) for our Ranked # 1 ‘Life Sciences Information Technology
customers to ensure a smooth, rapid transition to the cloud Outsourcing’ Vendor
while minimizing risk and keeping operating expenses in Ranked # 1 ‘Product Development and Engineering
check. Outsourcing’ Vendor
Became Co-development Partner & Preferred Implementer Ranked # 2 ‘Property and Casualty: Automotive
for Oracle’s Supplier Data Management solution. Insurance BPO’ Player
Our Inventory Liability and Risk Management solution was Ranked # 4 ‘Health Insurance BPO’ Player
identified as a part of SAP’s ‘Best Run Now’ package
Ranked # 8 HomeOwners BPO Player
solutions for the recessionary economy.
Listed among the Top 10 ‘End-to-end Insurance BPO/ITO
Expanded our footprint to become a SAP Services Partner in
Services Providers’
Japan, offering our global experience in consulting and
system integration in support of SAP solutions to Japanese Ranked among Top 15 ‘Best Managed Global
enterprises. Outsourcing Vendor of 2009’ in the Annual Client
Experience Survey.
Chosen by Hitachi as a preferred partner outside Japan for

2 Patni > Annual Report 2009

Key performance indicators: 2004-09

118.7

114.0
718.9
662.9

655.9

99.5

97.8
578.9

87.4

83.2
79.2
73.8
450.3

70.4
60.8

60.9
54.7
326.6

04 05 06* 07 08** 09*** 04 05 06* 07 08** 09*** 04 05 06* 07 08** 09***

Revenue (US$ mn) Operating Income (US$ mn) Earnings after Tax (US$ mn)

14,945

14,894
5.79

13,995
0.82

12,804
0.76

4.90

11,802
4.46
0.61
0.57

9,661
3.68
0.48

3.19
0.44

2.31

04 05 06* 07 08** 09*** 04 05 06* 07 08** 09*** 04 05 06 07 08 09

Basic & Diluted Book Value per Share (US$) Number of Employees
Earnings per Share (US$)

* Excluding additional provision for prior years’ tax review by IRS and review by Department of Labor of Patni’s US operations; leading to an
increase in gross profit and operating income by approximately US$ 7.0 million, and decrease in net income by US$ 19.9 million, as
compared to the reported numbers.
** Excluding reversal for prior years' tax review by IRS of Patni US operations; leading to a decrease in gross profit and opera ting income by
approx US$ 2.7 million, and decrease in net income by US$ 18.2 million, as compared to the reported numbers.
*** Excluding reversal for prior years' tax review by IRS of Patni US operations and reversal of tax positions for Patni India operations; leading to
a decrease in gross profit and operating income by approx US$ 1.2 million, and a decrease in net income by US$ 22.01 million, a s
compared to the reported numbers.

>3
 ‘Evolution’ is
essential to rise to
greater heights.
Preparing for the
future, Patni is
building on its legacy
to ready itself for its
next phase of
growth.
Narendra K Patni, Chairman

4 Patni > Annual Report 2009

Letter to shareholders
Some key initiatives we undertook during the year:

Towards evolving Patni to ride the next growth cycle, we

thought it important for us to align ourselves to a shared
vision and values. We also believed that this was vital to
balance growth and business effectiveness for our
stakeholders. This also set the basis for a new corporate
strategy.

Our corporate strategy was driven by four key vectors:

Enhanced global presence

We structured the Company’s regional business into four
key geographies, namely Americas, EMEA, APAC and
SAARC. To tap the growing opportunity in Asia Pacific,
we divided the region into APAC and SAARC. With this,
we aim to maximize the opportunity through a
concerted focus in the regions. The SAARC region will
function independently with a growing focus on India.
We are bullish about India's growth and have plans to
strengthen our India presence with a focus on the
Telecom, Insurance, Manufacturing and e-Governance.

CEO’s review During the year, we established our new EMEA regional
headquarters in London and continue to invest in key
talent in the region with increase focus in Continental
Europe and MEA. This reinforced regional structure is
foreseen to see the Company’s new vision through to
fruition.

Micro-verticals led growth

The year 2009 started amidst speculation and
We dived deeper into our key accounts, addressing our
uncertainty precipitated by the economic downturn portfolio gaps. We have decided to focus on
which engulfed every nation in the world. While the rationalizing our portfolio and increasing our intensity at
developments during the year demonstrated the the sub-vertical level that will drive our customer and
resilience and maturity of the Indian IT-BPO industry, asset acquisition to deliver scale.
Patni saw opportunities to improve the Company’s Operational excellence
overall competitive position. During the year, we We also optimized our operational structures to deliver
focused on strategic initiatives towards achieving our on our shareholder promise. The year 2009 was one of
long-term goal of creating an operationally efficient, financial discipline, reduction in corporate overheads and
global organization with a globally diversified customer organizational optimization.
portfolio, demonstrating adaptability to swiftly seize ‘Great-place-to-work’ practices
business growth opportunities and ensure sustained Having expanded our global footprint, we invested in
profitability. numerous People Initiatives to become a ‘great-place-to-

>5
 work’, with a focus on developing a winning culture and Software and services export revenues for the Indian IT-BPO
a confidence in our future. industry were estimated to grow over 5.5% from FY2009
to reach USD 49.7 billion in FY2010. The US continues to
We made early investments with the right leadership
be a dominant market, but emerging markets grew three
changes in 2009, to set the pace for our 2010 growth. We
times higher.
put a new Executive Leadership Team in place to extend
and enhance the management and to run critical positions. The IT-BPO sector generated direct employment for 2.3
We announced key leadership appointments as part of a million people, while indirect job creation estimated at
concerted effort to accelerate regional based growth. approximately 8.3 million.

Confident of our long-term prospects, we invested in The domestic IT-BPO market (including hardware) grew by
extending and deepening the senior management and nearly 8.5% driven by greater IT-BPO adoption and e-
overall talent pool of the Company. Governance initiatives. Outsourcing by India Inc. is on a
growth path — Telecom and Retail sectors are high on
Having established our vision, mission and values and
outsourcing adoption.
finalized our growth strategy, we re-aligned our
organizational structure. Our new organization structure is Engineering services (including embedded solutions) export
aimed at achieving our business objectives and building an revenues were estimated to touch USD 7.9 billion in
integrated and streamlined organization that will FY2010 as investment in innovation, IP development and
dynamically adapt to the evolving business realities. The reverse innovation took centre stage.
new structure will help us execute our strategy faster with Among other services, Application Outsourcing and
greater empowerment and frontline decision-making, agile Infrastructure Outsourcing were the key growth drivers.
and adaptive in a changing and challenging world. Going forward, focus of the Indian IT-BPO industry will be
on transformation and customer-centric solutions.
We focused on creating an operationally India value proposition: Historical drivers are giving way to
efficient, global organization with a value creation, innovation, success to new markets and
globally diversified customer portfolio, customers.

and an ability to swiftly seize business India continues to retain its lead as an effective sourcing
destination, based on its unique value proposition.
growth opportunities and ensure
sustained profitability.
Corporate Performance
We are pleased with our 2009 execution as we march
Industry Environment towards our 2011 goals. We contained the revenue decline
To better appreciate our corporate strategy in the light of the to 8.8% and have managed our cost structure and risks well
IT-BPO industry environment, I would like to share with you during the year which is reflected in our operating results.
some highlights from the NASSCOM Strategic Review 2010: Net income adjusted for extra ordinary items was at US$ 97.4
million for the year, higher by 17.0% against US$ 83.2
Worldwide technology products and services spend were million for 2008.
estimated to cross USD 1.5 trillion in 2009, declined by
We have used the down-turn effectively to further enhance
almost 3%; government and healthcare verticals continued
the strategic framework of our business. We will continue to
to grow while BFSI and manufacturing declined.
rationalize our cost structures to neutralize the short-term
IT indices showing signs of recovery from the recessionary cost pressures due to supply side inflation and forex changes.
forces and stabilization started showing evidence from the We have developed a strong growth pipeline for 2010 and
latter part of 2009. However the timing and strength of this is further improving, with an increase in our ability to
the recovery varied across regions, with Asia leading the participate in large deals. I am optimistic about our prospects
way, the US following and Europe lagging behind. and our win ratio.

6 Patni > Annual Report 2009

We were ranked as ‘# 1 Green Innovative IT Vendor’ in the a ‘SAP Application Maintenance Services Provider’; we built a
2009 Black Book ‘Top Green Outsourcing Vendors’ Survey. complete offering in the Product Configuration System space,
We were also named the 2009 ‘IT Supplier of the Year’ by including a proprietary solution framework - for the ‘make-
Weyerhaeuser – a leading provider of integrated forest to-order’ industry; we also built a deal structuring framework
products. With regard to ‘People’, we were ranked among within the product configurator offering for optimizing the
the Top 20 in DQ-IDC’s ‘Best Employer Survey 2009’; also ‘engineer-to-order’ process and got industry acceptance; we
ranked as the 7th ‘Preferred Employer’; and among the Top built a visualization dashboard for SKU rationalization process
15 in the ‘BPO Employers Survey’. We were also listed as a for the CPG industry; we collaborated with Oracle
winner of the ‘4th Employer Branding Awards 2009-10’ Corporation in developing an MDM product for supplier
under the ‘Innovative retention strategy’ category. collaboration.

Communications, Media & Utilities (CMU) BU made

We have developed a strong growth breakthrough wins in the Saudi Arabian market through our
pipeline for 2010 and this is further consulting business and won additional contracts in the
domestic Indian market. We also continued to consolidate
improving, with an increase in our
our consulting, systems integration and offshore platform
ability to participate in large deals. into a cohesive unit that is now able to seamlessly deliver
services for clients across the industry’s value chain.

The Product Engineering Services (PES) BU did well in

Differentiation Reaps Rewards
sustaining its business in 2009, and more than 95% of its
During the year, our vertical and horizontal BUs continued to
revenues came from repeat business from its customers
build solutions for differentiation, which resultantly reaped
cutting across diverse industries. The SBU now nurtures more
rewards.
than 100 customer relationships with the world’s leading
Insurance BU achieved significant growth over 2008, R&D and Technology enterprises and OEMs. PES continues to
retaining its distinction of being the ‘highest revenue and maintain its industry leadership position in the Medical,
highest margin’ business in 2009. Our ability to help our Storage, and Automation domains. It has also built a strong
customers derive significant business benefits through our presence in the Enterprise platform, Automotive and
services enabled us to deepen our strategic customer Consumer Electronics domain over the years. Some of the
relationship and achieve significant growth over 2008. We emerging growth areas for PES include Railway Engineering,
continue to pursue our strategy of differentiation through Virtualization and Gaming.
micro-vertical focus. Deepening our capabilities in chosen
Life Sciences BU. Our thought leadership and expansion of
sub-verticals has enabled us to introduce differentiated IT and
client base helped us to be ranked the ‘# 1 Life Sciences
BPO service offerings for Life, Health and P & C Insurers.
Information Technology Outsourcing Vendor’ by the Black
Financial Services (FS) BU, despite facing difficult times in Book of Outsourcing. Growth in 2009 came from the
the year 2009, succeeded in winning 11 new customers, expansion of our project portfolio with the top ten life
including some leading names. We achieved this by sciences clients. Also, a strong foundation for future growth
leveraging our ability to provide differentiated services for was laid with the acquisition of new clients across industry
Asset Management, Wealth Management and Benefits segments. We advanced our relationships through a range of
Administration. The focus on these chosen sub-verticals will services provided during the year. Additionally, we advanced
enable us to drive growth in 2010. our SAP portfolio of Life Sciences-specific offerings, and
accelerated our relationship with Oracle with a focus on
Manufacturing, Retail and Distribution (MRD) BU
clinical and safety areas.
retained all of its major customers with innovative structuring
of deals and strong customer focus. The BU continued its Our Strategic Outsourcing Group launched two consulting
focus on unique vertical and IT solutions during the year: We led programs – ACT!Now for cost transformation and iGSS
were registered as the first Indian IT vendor to be certified as for integrated support services. These programs saw

>7
significant customer successes coming from the Asia Pacific Patni. The BU received noteworthy recognitions and accolades
and North American Geographies. during the year.

Enterprise Application Services (EAS) BU has taken Verification & Validation (V&V) BU – our independent
significant strides towards making a mark as a solution testing practice continued to maintain its high growth
provider. Besides traditionally strong areas of Supply Chain trajectory and grew by around 35% in 2009, with over 60%
Planning and Manufacturing, we have now come up with growth in its million dollar clients. A significant portion of the
unique offerings jointly with SAP and Oracle in the increased revenue in testing came from the Insurance and
Compliances – Corrective Action Preventive Action (iCAPA) Finance sector. In addition, solution building in test
domain for Life Sciences vertical, Inventory Risk Liability (IRL) automation, alliance partnerships in new testing products,
for Hi-tech vertical and Procurement solution for Hospitality and capability into non-functional areas of testing, such as
industry (PROMPT). EAS has also worked with Oracle on Application Security testing, Data Warehouse testing, and
Automated Testing Suite (ATS) end-to-end testing tool and Performance testing catalyzed growth for V&V. ‘Framework
jointly build technical frameworks for integrating ATS with for Accelerated Automation Solution for Testing (FAAST)’ was
Oracle User Productivity Kit (UPK)/Tutor products. upgraded to its next version and rolled out to its existing and
new clients.
Customer Dynamics & Intelligence BU’s strategy of
providing integrated services and solutions across Business The Microsoft CoE built innovative solutions to help
Intelligence and CRM on a strong EAI platform continued to customers migrate their Lotus Notes application portfolio to
see a differentiated value proposition. Our investments and SharePoint. The CoE successfully conducted pilots on
expansion of our solutions assets created more value-added Microsoft’s Azure platform and hosted applications in Cloud.
services options for our customers. Most notable were:
The IT Governance CoE launched innovative solutions
Business Intelligence SaaS applications deployed on the
specifically ‘e-mail plug in on Blackberry for CA-Clarity suite’
Amazon cloud; and Mobile CRM solutions based on
and ‘Calendar synchronization with Outlook for CA-Clarity
Salesforce.com, Chordiant and Siebel.
suite’.
CIS & BPO BU added several marquee names to its growing
The Business Process Management (BPM) CoE grew its
clientele. We grew our business in Europe by 20% with a
footprint by launching a service offering in Open source BPM
focus on Telecom, Helpdesk and Customer services. The BU
platforms.
scaled up its insurance, asset administration, retirements,
F&A, Life Sciences and integrated help desk practices and also Regional Performance
launched new service offerings in the areas of Insurance Our focus on geographical diversification continued with the
(Claims as a ServiceTM), asset administration (Hosted setting up of a new office and delivery center in Singapore.
Reconciliations, Reference Data Management), iGSS Our Mexico delivery center went operational in early 2009.
(Integrated Global Support Services) and ITIL Consulting. The We also opened an entity in Switzerland. While 2009 was the
CIS & BPO BU received several recognitions during the year. year of unprecedented meltdown, we were able to arrest our
Infrastructure Management Services (IMS) BU saw revenue downfall from Q2 onwards and expect that such a
significant growth in Data Center operations as well as diversification will yield significant positive results in 2010.
Database and Web-Operations Productized Services during The US region continued to be the biggest market with an
the year. We rolled out various service and delivery models to 80.1% contribution to the total revenues in 2009.
supplement the BU’s RIMO++ and ADM++ offerings, in
EMEA region’s contribution was 14.2% in 2009.
response to the dynamic market conditions. Managed
Services, Shared Services, and Output/Outcome were some of The Asia Pacific region contributed 5.7% which was 10
the models used to transition the customer operation risks to basis points more than 2008.

8 Patni > Annual Report 2009

Infrastructure external certifications from vendors such as Microsoft, Sun,
In 2009, we decided to increase our regional presence in the Oracle.
regions we conduct our business, and build more employee
friendly facilities globally. In this direction, we firstly shut- As the global economies stabilize,
down many of our older facilities in Noida, Mumbai, Pune
we are well prepared and poised
and Hyderabad and co-located our employees in newer,
upgraded facilities in India. We also opened a delivery center for growth.
in London, UK where we have been active for over a decade.
With focus on growth in the Asia-Pacific region, we
inaugurated a new sales office and delivery center in The Road Ahead
Singapore that will serve as a headquarters for the region. Induced with a new vigor as a result of the numerous
organizational initiatives, we feel confident of demonstrating
People Initiatives our momentum to execute going forward, and regaining our
In view of the Company being poised for growth and rightful place in the Indian IT industry. As the global
positioned well to reap new opportunities, significant focus economies stabilize, we are well prepared and poised for
was given to people practices during the year. growth. While the market is still thwart with risks of double
Our global headcount stood at 13,995 at the close of 2009. dip recession, we are positioned well to reap the
We added 18 senior management personnel at the Vice- opportunities given our impressive pipeline.
President level and above, during the year. A continuous We are now looking at 2010 and beyond with renewed
thrust on improvement through focussed interventions optimism. We believe that walking slower doesn’t make the
resulted in a significant dip in the Company’s attrition figures distance shorter. We will focus on accelerating our pace,
from 20% (at the end of 2008) to 13.7% (at the end of aligning ourselves to the operating and strategic priorities;
2009). this will ensure that our achievements will happen sooner
The Patni Academy for Competency Enhancement (PACE) and than we envision. Also, we have sound financial and
Learning & Development delivered technical, functional & management scale to grow our business faster through
behavioral training of close to 58,112 person days in 2009. acquisitions.
The Faculty Development Programs as a part of the PLEdge In the coming year, our focus is going to be on working
initiative (Patni's Industry-Academia collaboration) were together in a more unified way to accelerate growth and
attended by 50+ faculty members from colleges in and create stakeholder value by winning in the market place.
around Mumbai. Totally, 82 employees completed their
I thank you for your trust and confidence placed in us
Master’s degree through Patni–BITS collaborative program
throughout the year. I firmly believe that we as a company
specializing in Software Engineering and Embedded Systems.
cherish our legacy while being excited about our future.
Through the newly launched ‘Patni Leadership Academy’,
Regards,
over 150 persons successfully completed a customized
executive education program or an Executive MBA program
from IIM-Ahmedabad and IIM- Kozhikode, respectively. Three
senior leaders went through the Advanced Management
Program of Harvard Business School.
Jeya Kumar
As part of our Global Resources in Technology (GRiT)
initiative, more than 2500 GRiT employees successfully
5 May 2010
completed one or more of the certifications which included
Mumbai

>9
 initiatives that would lead to organizational renaissance.
However, the magnitude of transformation that we
contemplated required fundamental changes in the
company’s structure, management processes and people-
mindset. But there was a strong sense of shared commitment
at the top. We were ready to embark on a journey never
ventured before.

As the global fiscal crisis stared in the

face, we strengthened our resolve to
further improve our business
resiliency.

To succeed in this endeavor, we had to build a sense of

urgency among the employees about the evolution of our
organization at a speed and scale that was never witnessed
before. The transformation journey began in February 2009,
when the executive leadership team communicated
company's transformation agenda, strategic business
Evolving priorities, vision and values in a consistent manner to
employees across all geographical regions. Our strategy was
like never before centered around four themes: (1) Global presence (2) Micro-
vertical specialization (3) Operational excellence (4) ‘Great-
place-to-work’ practices. The overwhelming response boosted
The economic downturn triggered a never before seen sense our confidence and strengthened our resolve to overcome
of urgency. Most organizations carefully monitored the impending challenges and move forward. In the last one
themselves for signs of financial failures, evaluated the year we have successfully kick-started the process of
effectiveness of strategies, and also revisited their objectives. evolution and started experiencing the difference. Here are
Consequently, they either ratified their game plan or sought some of the outcomes resulting from the implementation of
change of course. Like the others, we too felt that the global the strategic agenda.
economic crisis provided us with a once-in-a-lifetime
opportunity to dispassionately examine ‘who we are as an
organization’, ‘how we want to operate’ and ‘what is our
The magnitude of transformation that
performance vis-à-vis industry standards’. The economic we contemplated required fundamental
shock and uncertainty in the demand for IT services sounded changes in the company’s structure,
a clarion call for action. We decided to do more than management processes and people’s
attempting to eke out a survival strategy. It was an
mindsets.
opportune moment to initiate some transformational

10 Patni > Annual Report 2009

 Global Presence
We are a global player operating in an integrated, global
business environment. It was important that we had a
business infrastructure that helped us better manage the
interdependencies across economies and businesses. There
was an urgency for us to have a four-tier global delivery
architecture that was multi-cultural, multi-lingual, and multi-
regional and encompasses the right mix of onshore, offshore,
and near-shore delivery services. Soon, we announced our
strategy to augment the ‘follow-the-sun’ model aimed at
serving regional markets. We opened our first near-shore
center in Queretaro, to augment our global delivery
capabilities and serve the North American and Latin American
markets. We also opened an onshore delivery center at El
Paso in the Texas region to service the North American
customers.

Revenue risk diversification is another facet of our

geographical expansion. As the economy plunged into deep
recession in the early 2009, leading to a sharp decline in IT
spending across the US and Europe, we focused our sales
efforts on APAC and other emerging markets, where the
impact was comparatively less severe. The investments in the
new APAC regional headquarters helped us improve our
coverage of all the important markets in the region. Our
focus in India is more than ever before. We have the entire
wherewithal to capitalize on the opportunity that looms on
the horizon due to the surge in public sector and
government spending on IT initiatives. The traction in new
markets like Turkey and South Africa in EMEA had put us in a
safer situation to arrest revenue shortfall.

As we strived to augment our global presence, we also

ensured that we remain focused on our objective of being a
customer-centric organization. We identified US, EMEA,
It was important that we had a business APAC and SAARC as our focus regions and appointed
infrastructure that helped us better regional heads who are accountable to build and support
manage the interdependencies across strong relationships with customers and prospects in their

economies and businesses. respective markets and propel growth.

> 11
 Micro-vertical Specialization
The shift in buying preferences have changed the face of
service delivery. Clients no longer buy commoditized services.
Vertical domain expertise is also not a strong differentiator.
The focus is narrower than ever before as clients increasingly
seek business process-related solutions that can create a
business impact.

Keeping in tune with the trend, we leveraged micro-vertical

specialization to offer standard solutions that are not only
cost-effective but also faster to implement and easy to
operate. Drawing upon our understanding of the unique
requirements in every industry, we delivered pre-configured
industry capabilities or worked with our partners to develop
solutions that addressed such opportunities. Some of our
process-based solutions included (a) PROMPT – an e-
procurement solution for hospitality industry, (b) iCAPA – an
incident and complaint management solution for life sciences,
(c) atoms – pre-packaged processes for telecom operators
and (d) Inventory liability and risk management dashboard – a
reporting and analytics solutions for the hi-tech industry.

Buoyed by the success of the micro-verticalisation strategy in

a few select areas, we have made investments to create
intellectual property driven solutions in Underwriting, Policy
Administration, Claims Management, Asset Management,
Benefits Administration and Retail & Commercial Banking. We
are convinced that micro-vertical specialization is a sure-fire
Micro-vertical specialization is a way to climb up the business value trajectory and pursue a
sure-fire way to climb up the business non-linear model of growth.

value trajectory and pursue a non-linear

model of growth.

12 Patni > Annual Report 2009

 Operational Excellence
As the shadow of the global financial slowdown loomed
large, we responded with a sense of immediacy to assess our
company’s competitive position. We pulled all the levers that
drove operational efficiencies. We introduced flexibility in our
cost structures to absorb margin erosion caused by depressed
economic environment and sluggish demand. We scrutinized
costs, assets and investments and embarked on a sustainable
cost management program. Consolidation of our delivery
capabilities gave a boost to our utilization as well as customer
satisfaction levels. The cost efficiencies yielded favorable
financial results. Our bench utilization was at an all time high
and our EBITDA margin (ex-FX) touched a four-year high.

Efficiently managing daily operations during a downturn can

help the company stay afloat, but does not fuel growth.
Hence, we continued to make market sensitive investments to
energize marketing and sales. We induced efficiency in our
business operations as we digitized most of the core
processes as a part of the ‘iChange’ initiative. We sharpened
our focus on automating our service delivery and leveraging
reusable assets, frameworks and tools (RAFT). Our delivery
teams developed both technology and industry specific
solution accelerators and frameworks aimed at accelerating
time-to-deliver and reducing effort intensity.

Recession also provoked changes in client engagement

models, which in turn had an impact on the service delivery.
We induced efficiency in our business Thanks to the robust Patni PLUS TM suite of delivery
operations as we digitized most of the methodologies and good project management practices, we
could transform the terms of revenue engagement from a
core processes as a part of the
T&M model to emerging pricing models which are based on
‘iChange’ initiative. delivery of output and business outcome.

> 13
 ‘Great-Place-to-Work’ Practices
During difficult economic situations, it was important for us
to stay focused on employees and keep the business moving
forward. We did what was very obvious to do i.e. improve
cost competitiveness, boost employee engagement and
demonstrate compliance through corporate governance.
However, we did not stop here in our journey towards
workplace transformation.

We firmly believe that fostering an exceptional work

environment is a business imperative. By creating a genuinely
appealing workplace that is supportive, efficient and
committed to excellence, our existing and potential
employees will strongly identify Patni as a great place to
work. We are adopting good workplace practices to help
employees develop a sense of professional identification and
a deeper connection with the organization.

In 2009, our executive leadership reviewed and reflected on

what is really important to us in an enduring way. They
reached a common understanding about the inherent beliefs
in the organization and distilled its essence into a new set of
core values. The new values emanate from previous Patni
values, reflecting the evolution of our business. They portray
who we are, the way we work, and what we aspire to
achieve. In the last one year, we have diligently worked to
weave our core values into the fabric of everything we do to
By creating a genuinely appealing positively impact those who seek our services. We will
workplace that is supportive, efficient and continue to operate with allegiance to the following core
values: Passion, Honesty & Integrity, Operational Excellence,
committed to excellence, our existing and
Innovation, Accountability, and Customer Centricity.
potential employees will strongly identify
In line with our values, we have redesigned most of our
Patni as a great place to work.
processes and systems pertaining to recruitment, talent

14 Patni > Annual Report 2009

management, talent retention, competence development,
leadership pipeline creation and succession planning. The new
systems are designed to invigorate behaviors associated with
our values. There was a renewed focus on influencing and
inspiring engagement by formulating a ‘people’ strategy that
drives accountability, boosts productivity and performance,
fosters collaboration, and creates growth opportunities for
leaders, managers, and frontline employees.

As we evolve into a global organization, we are doing more

than just expanding the geographical footprint. We are
consciously building a culture, which welcomes diversity and
inclusivity. The organization is committed to advance the
diversity agenda in a sustained and proactive manner by
recruiting and employing a workforce representing different
nationalities, cultures, genders, employment histories, and
levels of physical ability. We are optimistic that in the coming
years as the demographics of Patni become comparable with
the best in our peer groups, we will transform into an
organization, which would be known for innovation,
openness, good governance, high performance and work
ethics, greater degree of specialization, and collaborative
work culture.

The Way Forward

The evolution is far from over. We will build on our early
accomplishments and keep the momentum going. There's
nothing that we can't do if we put our minds and energy to
it. There are three good reasons to be optimistic about our
company: our business fundamentals are strong, we are
focused and moving in the right direction, and our people are
at par with the best in the industry.

> 15
 Directors' Report

To,
The Members,
PATNI COMPUTER SYSTEMS LIMITED

Your Directors have pleasure in presenting their Thirty Second Annual Report together with Audited statements of Accounts for
the year ended 31 December 2009:

Financial Results:
31 December 2009 31 December 2008
(Rs. in million) (Rs. in million)

Sales 17,349 15,410

Resulting in Profit Before Tax 5,818 4,133

Profit After Tax 5,427 3,891

Profit available for appropriation after adding to it Previous Year’s Brought Forward 20,886 16,298

Appropriated as under:

Adjustment on account of employee benefits – –

Transfer to General Reserve 543 389

Final Proposed Dividend on Equity Shares @ 150% (Previous Year 150 %) 387 384

Corporate Tax on above Dividend 66 65

Balance Carried to Balance Sheet 19,890 15,459

16 Patni > Annual Report 2009

 (Left to Right)
Naresh Lakhanpal EVP, President – Patni Americas; Deepak Khosla SVP, President – SAARC; Derek Kemp EVP,

Executive Leadership Team

President – EMEA; Satish Joshi EVP, Global Head –Technology & Innovation; Mohan Hastak SVP, Global Head – AD & AM;
Ajay Chamania EVP, Global Head – Product Engineering Services; Rajesh Padmanabhan EVP, Global Head – Human
Resources; Jeya Kumar Chief Executive Officer; Anil Gupta EVP, Global Head – Business Operations; Surjeet Singh Chief
Financial Officer; Sanjiv Kapur SVP, Global Head - BPO & CIS; Sunil Chitale EVP, Global Head – ES & SI; Niket Ghate SVP,
General Counsel; Vijay Khare EVP, Global Head – Industry Verticals; V. Mathivanan EVP, President – APAC.
Board of
Directors

Narendra K Patni Jeya Kumar Arun Duggal Pradip Shah Ramesh Venkateswaran
Chairman Chief Executive Officer Independent Director Independent Director Independent Director

Gajendra K Patni Ashok K Patni Michael A Cusumano Pradip Baijal Vimal Bhandari
Non-Executive Director Non-Executive Director Independent Director Independent Director Independent Director

William O Grabe Louis Theodoor van den Boog Abhay Havaldar

Non-Executive Director Non-Executive Director Alternate Director to
William O Grabe

Contd.
Business Performance but, brought the world to a standstill. While robust
The performance of your Company during the year under fundamentals ensured that the recession impact on India was
report has shown improvement over the previous year. Total relatively moderate, in an increasingly globalised environment,
revenue for the year ended 31 December 2009 amounted to it could not escape declining GDP growth, rising
Rs. 17,349 million as against Rs. 15,410 million for the unemployment and weakened consumer demand. However,
corresponding period last year, registering a growth of about prompt action by governments across the world and stimulus
13%. The Company has posted the Net Profits after tax to packages helped to contain this downfall and make way for
Rs. 5,427 million as compared to Rs. 3,891 million for the revival by the end of 2009.
corresponding period last year, registering a growth of about
The industry is estimated to aggregate revenues of $73.1
39% for the year ended 31 December 2009. Even on
billion in FY2010, with the IT software and services industry
consolidated basis, revenues were increased in the current
accounting for $ 63.7billion of revenues. During this period,
year 2009 by 0.92% to Rs. 31,461 million from Rs. 31,173
direct employment is expected to reach nearly 2.3 million, an
million in 2008.The net income increased by 34%.
addition of 90,000 employees, while indirect job creation is
Dividend estimated at 8.2 million. As a proportion of national GDP, the
Your Directors are pleased to recommend the payment of sector revenues have grown from 1.2% in FY1998 to an
dividend for the year ended 31 December 2009 at Rs.3/- estimated 6.1% in FY2010. Its share of total Indian exports
(Rupees Three only) per share (150 percent) on face value of (merchandise plus services) increased from less than 4 % in
Rs.2/- [Previous year Rs.3/- per share (150 percent)], subject FY1998 to almost 26% in FY2010.
to approval of Members at the ensuing Annual General Export revenues are estimated to gross $ 50.1billion in
Meeting.
FY2010, growing by 5.4%over FY2009, and contributing 69%
of the total ITBPO revenues. Software and services exports
Economic Scenario and Outlook
(including BPO) are expected to account for over 99% of total
The year 2009 began amid great uncertainty with regard to
exports, employing around 1.8 million employees.
the likely impact of the global financial crisis, which has
initially erupted in the second half of 2008. Governments The industry’s vertical market mix is well balanced across
around the world acted quickly and decisively, and in a several mature and emerging sectors. 2009 saw increased
coordinated manner, which helped in preventing the adoption of outsourcing from not only our biggest segment
situation slipping into a full scale depression. Nevertheless, i.e., the Banking, Financial Services and Insurance (BFSI), but
recession on a global scale was, inevitable to some extent and also new emerging verticals of retail healthcare and utilities.
the only question was, and still is to some extent, how deep
According to the report, the beginning of the new decade
the recession would be and how long it would last. Most of
heralds the slow, but steady end of the worst recession in the
the economies are showing sig of improvement but it is still a
past 60 years.
long way to go. Emerging markets in general and India in
particular, are leading the way on the road to recovery, with Global GDP, after declining by 1.1%in 2009, is expected to
strong growth rates based on robust economic fundamentals. increase by 3.1%in 2010,and 4.2% in 2011,with developing
Despite of inflationary pressures gradually building, a steady economies growing thrice as fast as the developed
monetary policy course has been maintained, with a focus on economies. Improving economic conditions signifying return
supporting growth recovery. of consumer confidence and renewal of business growth, is
Nasscom Strategic Review 2010 states that the year 2009 expected to drive IT spending going forward. IT services is
ushered turbulence, with countries around the world expected to grow by 2.4% in 2010, and 4.2% in 2011 as
plunging into the recession. The housing bubble burst, companies coming out of recession harness the need for
followed by the financial crisis creating a domino effect that, information technology to create competitive advantage.

> 17
 Organizations now recognize IT’s contribution to economic Your Company has in-depth knowledge in its industry and
performance extending beyond managing expenditures. They technology practices. Insurance, manufacturing, retail and
expect IT to play a role in reducing enterprise costs, not distribution, communications, media and utilities and
merely with cost cutting but by changing business processes, financial services accounted for 24.7%, 29.0%, 17.9% and
workforce practices and information use. Movement toward 12.8% in 2008, respectively and 29.7%, 29.0%, 13.5%, and
SaaS and cloud computing, shared services, and more 12.8% in 2009, respectively. The Company’s technology
selective outsourcing will take firmer shape as near-term practices offer research, design and development services for
priorities to address constrained IT budgets. product engineering. Through its dedicated sales and
Government IT spending continues to rise across the world, management teams in each of its industry and technology
focusing on infrastructure, and security. Other areas of practices, your Company believes it is able to provide better
spending include BPM, data management, on demand ERP, client service, effectively cross-sell services to its existing
virtualization, and efforts to increase and deliver enterprise clients and develop new client relationships.
managed services on IP networks. Business process Your Company has a track record of successfully developing
outsourcing spending in 2010 is expected to be increasingly and managing large, long-term client relationships with some
driven by F&A segment and procurement, followed by HR of the world’s largest and best known companies. Your
outsourcing. Providers will increase their focus on developing Company’s customer base has increased from 199 clients as
platform BPO solutions across verticals and services.
of December 31, 2005 to 272 clients as of December 31,
Growth in outsourcing is expected to supersede overall IT 2009. Several of Company’s key executives are located in its
spend reaffirming its potential to not only support short term, client geographies to better develop and maintain client
tactical goals of cost savings, but also long term advantages relationships at senior levels. Repeat business accounted for
of increased competitiveness, efficiencies and access to 93.0% and 94.0% of its revenues in 2008 and 2009.
emerging markets. Within outsourcing, off shoring will see
increased acceptance as off shore based providers grow and Delivery Model
traditional service providers ramp up off shore delivery Your Company addresses its clients’ needs with its global
capabilities. India’s technology and business services industry delivery model, through which it allocates resources in a cost-
has flourished in the last decade. A bright future lies ahead efficient manner using a combination of onsite client
and the industry has much to look forward to, with the locations in North America, Europe and Asia and offshore
potential to quadruple its revenues over the next decade. locations in India. Your Company believes an integral part of
Several macroeconomic and social trends will support the rise its delivery is its industry knowledge, which your Company
of the IT-BPO sector in the future, in core and emerging refers to as its domain expertise.
markets.
Your Company refers to its own industry experts, business
Business Overview analysts and solutions architects who are located primarily
Your Company is a leading Indian provider of information onsite with the client as its “domain wedge”. These experts
technology services. The Company delivers a comprehensive are supported by additional personnel who provide technical
range of IT services through globally integrated onsite and services onsite on a temporary basis, and by its trained
offshore delivery locations primarily in India, which the professionals located normally at one or more of our nine
Company calls its global delivery model. Your Company offers offshore centers in India. Typically, at the initial stage of a
its services to customers through industry-focused practices, project, your Company provides services through its onsite
including insurance, manufacturing, retail and distribution, industry and technology experts and its transient onsite
financial services and communications, media and utilities, delivery personnel.
and through technology-focused practices. Within these By applying its domain wedge approach, your Company
practices, its service lines include application development, delivers solutions that can be structured to scale to suit its
application maintenance and support, packaged software
clients’ needs. In certain cases your Company provides
implementation, infrastructure management services, product
dedicated offshore development centers, set up for a
engineering services, business process outsourcing and quality
particular client. Through these offshore development centers
assurance services.

18 Patni > Annual Report 2009

your Company integrates its clients’ processes and increased to 49.7% in 2009 from 45.6% in 2008. The
methodologies and believe it is better positioned to provide Company’s largest client contributed 11.9% of our revenues
comprehensive and long-term support. Your Company in 2009, compared to 10.7% in 2008. During 2009, clients in
maximizes the cost efficiency of its service offerings by the insurance, manufacturing, retail and distribution, financial
increasing the offshore portion of the work as the client services and product engineering services industries continued
relationship matures. To complement its domain wedge, your to contribute a large proportion of the Company’s revenues.
Company has aligned a majority of its sales and marketing Revenues from clients in these industries contributed 29.7%,
teams to focus on specific industry sectors. 29.0%, 12.8% and 15% to overall revenues respectively in
2009 as compared to 24.7%, 28.9%, 12.8% and 15.7%
Industry Practices, Technology Practices and respectively in 2008. Your Company’s clients in the
Service Lines communications, media and utilities industry contributed to
Your Company offers its services to customers through 13.5% of its revenues in 2009 as compared to 17.9% in
industry practices in insurance, manufacturing, retail and 2008.
distribution, financial services and communications, media
During 2009, your Company continued to derive a significant
and utilities, as well as in other industries. Your Company also
proportion of its revenues from clients located in the United
has technology practices that offer services in product
States. In 2009 and 2008, your Company derived 78.9% and
engineering and for Independent Software Vendors, or ISVs.
75.9% of its revenues from clients located in the United
The Company’s industry practices and technology practices
States.
are complemented by its service lines, which your Company
develops in response to client requirements and technology
Sales and Marketing
life cycles. The Company’s service lines include application
Your Company’s sales teams use a multi-pronged approach
development, application maintenance and support,
to market its services. They target certain industries and
packaged software implementation, infrastructure
service lines through focused sales executives, geographies
management services, product engineering, business process
through regional sales executives and large clients through
outsourcing and quality assurance services.
dedicated account managers. The Company has aligned a
majority of its sales and marketing teams to focus on specific
Customer Relationships
industries and geographies. In addition to its sales executives,
Your Company has always demonstrated the ability to build
your Company has industry experts and solution architects
and manage relationships with some of the world’s largest
who complement its sales efforts by providing specific
and best known companies. Our strategy to diversify our
industry and service line expertise. Your Company’s sales
revenue profile is on course.
efforts are also supported by its marketing professionals, who
Your Company’s active client base is at 272 as of 31 assist in brand-building and tracking the Company’s expertise.
December 2009 as compared to 331 as of 31 December
Your Company’s senior management and dedicated account
2008. In addition, the total number of clients that individually
managers are actively involved in managing client
accounted for over $ 1.0 million in annual revenues
relationships and business development through targeted
continued to be 92 as of 31 December 2009 and as of 31
interaction with multiple contacts throughout Company’s
December 2008.
clients’ organizations. Your Company aims to develop its
During 2009, your Company’s revenues from T&M projects client relationships into partnerships by working closely with
decreased by 7.3% over revenues in 2008, while revenues its clients’ managers and senior executives to formulate and
from fixed price contracts increased by 12.8% over the same execute an offshore outsourcing strategy, implement
period. T&M projects accounted for 59.4% of the Company’s engagement models that suit their particular challenges and
revenues in 2009, compared to 64.0% in 2008 and 62.2% of explore new service lines.
its new business was billed on a T&M basis.
Your Company has 28 sales offices across North America,
Your Company’s client concentration, as measured by the Europe, Japan and the rest of the Asia-Pacific region and 235
proportion of revenue generated from its top ten clients, sales and marketing personnel who are supported by

> 19
 dedicated industry specialists. Your Company sets targets for in computer applications or computer management
its sales personnel at the beginning of each year, which are comprised 12.73% and employees with masters in business
subject to periodic reviews. In addition to a base salary, the administration and equivalent qualifications comprised 3.80%
Company’s compensation package for sales personnel of its software professionals. Other degrees comprised
includes an incentive-based compensation plan driven by 11.77% of its software professionals.
achievement of the prescribed sales targets. Your Company’s
Your Company believes that it has a balanced mix of
sales and marketing professionals help promote the “Patni”
experience with approximately 28.6%, 33% and 38.4% of its
brand through targeted analyst outreach programs, trade
software professionals with work experience of less than 3
shows, white papers, sponsorships, workshops, road shows,
years, 3 to 6 years and over 6 years, respectively, as of 31
speaking engagements and global public relations
December 2009.
management. Your Company believes that a stronger brand
will facilitate the Company’s ability to gain new clients and to Facility Expansion
attract and retain talented professionals. In keeping with its plans for expansion, your Company has
constructed new facilities in India, which includes three
Personnel & Performance knowledge parks in Chennai, Navi Mumbai and Noida. These
Your Company strongly believes that its ability to maintain
knowledge parks have state-of-the-art infrastructure with
and continue its growth depends to a large extent on its
extensive workspace and training facilities and a modular
strength in attracting, developing, motivating and retaining
design for ease of segregation of dedicated projects with
the talent. The Company operates in seven major cities in
ability to provide scale and service to clients from one
India, which enables the Company to recruit technology
location.
professionals from different parts of the country. The key
elements of the Company’s human resource management The Navi Mumbai, and the Chennai facilities are expected to
strategy include recruitment, learning and development, accommodate up to 14,000 and 10,000 engineers,
compensation and retention. respectively, when fully completed. The Company estimates
that it may spend an aggregate of approximately $ 140
Your Company has established a work ethic based on values
million to complete these two projects. Phase I of the Navi
that transcend across its global operations. The culture is
Mumbai facility, having a capacity of 4,300 seats, is complete
oriented to high growth and performance that allows the
and occupied. Phase I of the Chennai facility, having a
Company to attract, motivate and retain high quality talent
capacity of 1,200 seats, is complete and partially occupied.
worldwide. Abilities are recognized with rewards for high
Construction of the Noida SEZ facility is completed with
performance.
capacity to accommodate 3,200 Seats and is partially
Your Company uses its competitive recruitment program to occupied. As of 31 December 2009, we had spent
select talent from India’s premier engineering institutions. An approximately $ 101.3 million on the knowledge parks. The
adaptive business model and mature management structure estimated amounts (net of advances) remaining to be
allow aggressive scalability without compromising on executed on contracts in relation to capital expenditure for
flexibility, responsiveness and reliability of services. the construction of various facilities, aggregated
approximately to $ 55.6 million as of 31 December 2009
Your Company employed 13,995 employees as of 31
which will be executed over 3 years. Your Company
December 2009. Out of 13,995 employees, 11,102 were
anticipates that expenditures for its expansion plans will total
software professionals. Of these software professionals, 2,372
approximately $ 20 to $25 million in 2010. In continuation of
employees were categorized as onsite and 8,730 as offshore.
Company’s policy to have its own campus operations, your
The Company’s software employees are highly-skilled and Company has acquired land in Pune, Hyderabad and Kolkata
have diverse educational backgrounds. As of 31 December in addition to its campuses in Mumbai, Chennai and Noida.
2009, graduate engineers comprised 67.03%, post graduate These facilities when fully built are expected to have a seating
engineers comprised 4.67%, employees with master’s degrees capacity for approximately 25,000 professionals.

20 Patni > Annual Report 2009

For the Chennai facility, your Company has acquired 18.75 Ranked # 1 ‘Product Development and Engineering
acres of land near Chennai for a lease term of 99 years to Outsourcing’ Vendor
establish a project in connection with software development Ranked # 2 ‘Property and Casualty: Automotive Insurance
and support services. Further, for the Mumbai facility the BPO’ Player
Company has been granted licenses to construct facilities over
Ranked # 4 ‘Health Insurance BPO’ Player
50 acres of land in a phased manner in Navi Mumbai.
Ranked # 8 ‘HomeOwners BPO’ Player
Corporate Developments & Accolades Listed among the Top 10 ‘End-to-end Insurance BPO/ITO
Your Company became the first Indian company to receive Services Providers’
global certification by SAP for its Application Management Ranked among Top 15 ‘Best Managed Global Outsourcing
Services. With this competitive edge, we are uniquely placed Vendor of 2009’ in the Annual Client Experience Survey.
to jointly partner with SAP to take this offering to their large
Listed in the ‘Global Services 100 – 2009’, instituted by
customer base.
Global Services and neoIT:
Your Company was ranked among the ‘Top 10 Best Ranked 7th among ‘Top 10 best performing IT Infrastructure
Performers in IT Services and IT Infrastructure Services’, in a Service Providers’
survey conducted by Global Services and neoIT. It was also
Ranked 8th among ‘Top 10 best performing IT Service
featured in the prestigious list of Top 100 innovative service
Providers’.
providers of the year.
Listed among the Top 20 India-Centric BPO players in
Your Company was named a ‘Challenger’ in Gartner’s Magic Competitive Landscape: Business Process Outsourcing, India -
Quadrant for Help Desk Outsourcing, North America, 2009 2009, by Gartner.
Report.
Named a ‘Niche Player’ in Gartner’s Magic Quadrant for CRM
Your Company was ranked as the No. 1 ‘Green Innovative Service Providers, North America, 2009 Report.
Information Technology Vendor’ by the prestigious 2009 Ranked 40th amongst the ‘top technology providers for
Black Book Top Green Outsourcing Vendors Survey. financial institutions’ in the ‘FinTech 100 - 2009’ list.
Your Company was named ‘IT Supplier of the Year’ by Listed as a regional level award winner at the ‘4th Employer
Weyerhaeuser, a leading provider of integrated forest Branding Awards 2009-10’ under the ‘Innovative retention
products. strategy’ and ‘Excellence in training’ categories.

Your Company was ranked #7 Preferred Employer in DQ-

Patni ESOP 2003 (Revised 2009)
IDC’s Best Employer Survey 2009.
Your Company had introduced the Employees Stock Option
Your Company was conferred the #7 ‘Preferred Employer’ Plan known as ‘Patni ESOP 2003’. The Plan is being
rank in DQ-IDC’s Best Employer Survey 2009 based on an administered by the Compensation and Remuneration
industry-wide employee satisfaction survey. The Company was Committee of Directors constituted as per SEBI Guidelines.
also ranked #16 ‘Best IT Employer’ after a comprehensive The details of Options granted under the Plan are given in the
analysis of HR policies across the industry. This rank is Annexure to this Report.
significant as it indicates a jump of 13 places from last year
for the Company. Subsidiary Companies
The Company has wholly owned subsidiaries viz. Patni
The Company also received some other key recognitions
Americas, Inc., Patni Computer Systems (UK) Limited, Patni
during the year:
Computer Systems GmbH, PCS Computer Systems Mexico, SA
Listed in the ‘Black Book of Outsourcing – 2009’: de CV and Patni Computer Systems Brasil LTDA.
Ranked # 1 ‘Life Sciences Information Technology
During the year, the Company set up the wholly owned
Outsourcing’ Vendor
subsidiary in Singapore viz. Patni (Singapore) Pte. Ltd.,

> 21
 Patni Telecom Solutions, Inc. and Patni Life Sciences Inc. are Mr. Vimal Bhandari was appointed as an Additional Director
the subsidiaries of Patni Americas, Inc., Company’s one of the of the Company w.e.f. 15 January 2010. Pursuant to
main subsidiaries. provisions of Section 260 of the Companies Act, 1956, he
shall hold his office till the ensuing Annual General Meeting
Patni Telecom Solutions (P) Limited and Patni Telecom
of the Company. In view of the same, it is proposed to
Solutions (UK) Limited are subsidiaries of Patni Telecom
appoint him as a director of the Company in the forthcoming
Solutions, Inc.
Annual General Meeting.
Patni Computer Systems (Czech) s.r.o. is the subsidiary of
Patni Computer Systems (UK) Limited. Corporate Governance
Your Company follows the principles of the effective
In view of the above and by virtue of Section 4 of the
corporate governance practices. The Clause 49 of the Listing
Companies Act, 1956 the Company has following eleven
Agreement deals with the Corporate Governance
subsidiaries (Collectively to be referred as “ Subsidiary
requirements which every publicly listed Company is required
Companies”) i) Patni Americas, Inc.; ii) Patni Computer
to comply with. The Company has taken steps to comply with
Systems (UK) Limited; iii) PCS Computer Systems Mexico, SA
the requirements of revised Clause 49 of the Listing
de CV; iv) Patni Computer Systems GmbH; v) Patni Computer
Agreement with the Stock Exchanges.
Systems Brasil LTDA; vi) Patni (Singapore) Pte. Ltd.; vii) Patni
Telecom Solutions, Inc.; viii) Patni Telecom Solutions (UK) A separate section on Corporate Governance forming part of
Limited; ix) Patni Telecom Solutions (P) Limited; x) Patni Life the Directors’ Report and certificate from the Company’s
Sciences, Inc.; and xi) Patni Computer Systems (Czech) s.r.o. Auditors confirming the compliance of conditions on
Corporate Governance as stipulated in Clause 49 of the
The Company has been granted exemption for the year
Listing Agreement is included in the Annual Report.
ended 31 December 2009 by the Ministry of Corporate
Affairs vide its letter dated 5 January 2010 from attaching to
Particulars of Employees
its Balance Sheet, the individual Annual Reports of each of its
Particulars of employees as required under the provisions of
Subsidiary Companies. As per the terms of the said letter, a
Section 217 (2A) of the Companies Act, 1956 read with the
statement containing brief financial details of the Company’s
Companies (Particulars of Employees) Rules, 1975, as
subsidiaries for the year ended 31 December 2009 is included
amended, forms part of this Report. However, in pursuance
in the Annual Report. The annual accounts of Subsidiary
of Section 219(1)(b)(iv) of the Companies Act, 1956, this
Companies and the related detailed information will be made
Report is sent to all the Members of the Company excluding
available to any member of the Company / its Subsidiary
the aforesaid information and the said particulars are made
Companies seeking such information at any point of time and
available at the registered office of the Company. The
are also available for inspection by any member of the
members desirous of obtaining such particulars may write to
Company / its Subsidiary Companies at the Registered Office
the Company Secretary at the registered office of the
of the Company. The annual accounts of the said Subsidiary
Company.
Companies will also be available for inspection, as above, at
the registered offices of the respective Subsidiary Companies.
Fixed Deposits
Your Company has not accepted any fixed deposits from the
Directors
Public. As such, no amount of principal or interest is
In accordance with the requirements of the Companies Act,
outstanding as of the balance sheet date.
1956 and Articles of Association of the Company,
Mr. Ramesh Venkateswaran, Dr. Michael A Cusumano and
Auditors
Mr. Louis Theodoor van den Boog are liable to retire and
M/s B S R & Co., Chartered Accountants, the present statutory
eligible for reappointment in the forthcoming Annual General
auditors of the Company hold office until the conclusion of
Meeting.
the ensuing Annual General Meeting. It is proposed to

22 Patni > Annual Report 2009

reappoint them as the statutory auditors of the Company C) Foreign Exchange Earnings/Outgo
until the conclusion of the next Annual General Meeting. M/s
B S R & Co., have, under section 224(1) of the Companies Act, Earnings in Foreign Currency 31 December 2009
1956, furnished the certificate of their eligibility for on account of: (Rs. in million)
reappointment.
Export Sale 17,395

Directors’ Responsibility Statement Others 62

Pursuant to Section 217(2AA) of the Companies Act, 1956,
Total Earnings 17,457
the Directors, based on the representation received from the
Operating Management, confirm that:-
Expenditure in Foreign Currency 31 December 2009
(a) in the preparation of the annual accounts, the applicable
on account of: (Rs. in million)
accounting standards have been followed and that there are
no material departure; Traveling Expenses 104

(b) they, in selection of accounting policies, have consulted Overseas Employment Expenses 2,224
the Statutory Auditors and have applied them consistently
Professional Fees & Consultancy Charges 435
and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of Subscription & Registration Fees 4
affairs of the Company as at 31 December 2009 and the Other Matters 273
profit of the Company for the period 1 January 2009 to 31
December 2009; Total Expenditure 3,040

(c) they have taken proper and sufficient care, to their best of Net Earnings in Foreign Currency 14,417
knowledge and ability, for the maintenance of adequate
accounting records in accordance with the provisions of the Acknowledgements
Companies Act, 1956 for safeguarding the assets of the Your Directors wish to convey their appreciation to all the
Company and for preventing and detecting fraud and other Company’s employees for their performance and continued
irregularities; support. The Directors would also like to thank all the
shareholders, consultants, customers, vendors, bankers,
(d) they have prepared the annual accounts on a going
service providers and governmental & statutory authorities for
concern basis.
their continued support.
Conservation Of Energy, Technology
For and on behalf of the Board of Directors
Absorption And Foreign Exchange Earnings/
Outgo:
A) Conservation of Energy
Your Company consumes electricity mainly for the operation Narendra K. Patni Jeya Kumar
of its computers. Though the consumption of electricity is Chairman Chief Executive Officer
negligible as compared to the total turnover of the Company,
your Company has taken effective steps at every stage to Date: 29 April 2010
reduce consumption of electricity.

B) Technology Absorption
This is not applicable to your Company as it has not
purchased or acquired any Technology for development of
software from any outside party.

> 23
 Annexure to the Directors' Report - Employee Stock Options Plan ('ESOP')
Information as on 31 December 2009
(Currency: in thousands of Indian Rupees except share data)
As of December 31, 2009
(a) No. of options granted 14,635,292*
(b) Pricing formula As per market price as defined
in SEBI guidelines on ESOP
or on face value of equity shares
(c) Options vested 3,069,095**
(d) Options exercised 2,973,145
(e) The total number of shares arising as a result of exercise of option 2,973,145
(f) Options lapsed 3,277,570***
(g) Variation of terms of options N/A
(h) Money realized by exercise of options; 582,630
(i) Total number of options in force; 8,384,577
(j) Employee wise details of options granted to;-
(I) senior managerial personnel during the year; Refer Table 1
(II) any other employee who receives a grant in any one year of option
amounting to 5% or more of option granted during that year. Refer Table 2
(III) identified employees who were granted option, during any one year,
equal to or exceeding 1% of the issued capital (excluding outstanding
warrants and conversions) of the company at the time of grant; Refer Table 2

Table 1
Employee Name Equity Options Granted
Jeya Kumar 1,850,000
Surjeet Singh 63,640
Ajay Chamania 21,710
Sunil Chitale 26,020
Vijay Khare 42,860
Satish Joshi 53,360
Manish Soman 50,000

Employee Name ADR Options Granted

Brian Stones 9,250
V Mathivanan 50,000
Naresh Lakhanpal 50,000
Derek Kemp 20,000

Table 2
Employee Name Equity Options Granted
Jeya Kumar 1,850,000

(k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of
option calculated in accordance with the Accounting Standard (AS) 20
'Earnings per Share' 41.47

24 Patni > Annual Report 2009

 As of December 31, 2009
(l) Impact of Employee Compensation cost calculated as difference between intrinsic
value and fair market value in accordance with SEBI Guidelines on ESOP
Profit for the year after taxation as reported 5,427,316
Add Stock based employee compensation determined 118,560
under the intrinsic value method
Less Stock based employee compensation determined under 173,614
the fair value method
Pro-forma profit 5,372,262
Reported earnings per equity share of Rs. 2 each
- Basic 42.32
- Diluted 41.47
Pro-forma earnings per equity share of Rs. 2 each
- Basic 41.89
- Diluted 41.05
(m) Weighted-average exercise prices and weighted-average fair values of options, for
options whose exercise price equals or is less than the market price of the stock ****
Weighted average exercise price - Equity Rs. 202.59
Weighted average fair value - Equity Rs. 124.96
Weighted average exercise price - ADR $12.36
Weighted average fair value - ADR $8.11
(n) The fair value of each stock option is estimated on the date of grant using the
Black Scholes option pricing model with the following assumptions for Equity
linked options which are in accordance with SEBI Guidelines on ESOP
Dividend yield 1.37% - 1.78%
Weighted average dividend yield 1.53%
Expected life 3.5 - 6.5 years
Risk free interest rates 5.94% - 7.21%
Expected volatility 37.01% - 44.16%
Weighted Average Volatality 39.42%
The price of the underlying share in market at the time of option grant Grant Date Price (Rs.)
March 10, 2009 106
July 6, 2009 256
August 26, 2009 451
The fair value of each stock option is estimated on the date of grant using the
Black Scholes option pricing model with the following assumptions for ADR
linked options which are in accordance with SEBI Guidelines on ESOP
Dividend yield 1.18%- 1.64%
Weighted average dividend yield 1.61%
Expected life 1.0 - 6.5 years
Risk free interest rates 0.52% - 2.96%
Expected volatility 42.41% - 50.79%
Weighted average volatility 46.65%
The price of the underlying ADR in market at the time of option grant Grant Date Price
January 8, 2009 $5.50
July 6, 2009 $10.59
August 26, 2009 $18.40
November 3, 2009 $19.35
(o) Ratio of ADS to Equity Shares 1 ADR = 2 Shares
* Including options granted to employees, who have then seperated. • ** Net of options lapsed. • *** As per the plan, in the event of
resignation from employment, the options lapse for individual employee. However, the said options are available to Company for
reissue. • **** For options outstanding.

> 25
 Disclosures required under Clause 12.2 of SEBI ESOP Guidelines
(Currency: in thousands of Indian Rupees except share data)
As of December 31, 2009
(a) No. of options granted 2,743,400
(b) Pricing formula The Company was not publicly listed as on
the date of grant of stock options. The stock
options were granted at the Fair Market Value
as determined by an independent agency.
(c) Options vested 2,163,479 **
(d) Options exercised 1,885,804
(e) The total number of shares arising as a result of exercise of option 1,885,804
(f) Options lapsed 579,921
(g) Variation of terms of options N/A
(h) Money realized by exercise of options; 272,197
(i) Total number of options in force; 277,675
(j) Employee wise details of options granted to;-
(I) senior managerial personnel; Refer Table 1
(II) any other employee who receives a grant in any one year of option amounting to
5% or more of option granted during that year. Nil
(III) identified employees who were granted option, during any one year, equal to or
exceeding 1% of the issued capital (excluding outstanding warrants and
conversions) of the company at the time of grant; Nil
Table 1
Employee Name Options Granted Employee Name Options Granted
Satish M. Joshi 62,000 Vijay P. Khare 63,300
Deepak Sogani 52,600 Ajay Chamania 34,700
Sunil Chitale 37,200 Sanjiv Kapur 20,000
Milind S. Padalkar 31,700 C. R. Krishna Shastri 30,100
Nand Kumar S. Pradhan 18,000 Kiran Patwardhan 17,000
Milind Jadhav 19,000 Mrinal R. Sattawala 58,300
Douglas W. Fallon 25,000 Sumedh Mehta 25,000
Sukumar G. Namjoshi 20,000 Parag S. Patel 15,000

(k) Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option
calculated in accordance with the Accounting Standard (AS) 20 ‘Earnings per Share’ 41.47
(l) Impact of Employee Compensation cost calculated as difference between intrinsic value
and fair market value in accordance with SEBI Guidelines on ESOP
Profit for the year after taxation as reported 5,427,316
Add Stock based employee compensation deteremined under the intrinsic value method –
Less Stock based employee compensation deteremined under the fair value method –
Pro-forma profit 5,427,316
Reported earnings per equity share of Rs. 2 each
- Basic 42.32
- Diluted 41.47
Pro-forma earnings per equity share of Rs. 2 each
- Basic 42.32
- Diluted 41.47
(m) Weighted-average exercise prices and weighted-average fair values of options, separately
for options whose exercise price either equals
or exceeds or is less than the market price of the stock
Weighted average exercise price Rs. 145
Weighted average fair value Rs. 20.11
(n) The fair value of each stock option is estimated on the date of grant
using the Black Scholes option pricing model with the following
assumptions which are in accordance with SEBI Guidelines on ESOP
Dividend yield 0.41%
Expected life 2-5 years
Risk free interest rates 4.75% - 4.90%
Volatility Nil
12.3 As the company follows intrinsic method for accounting for compensation
cost there is no impact on profits and the basic and diluted EPS, as the
excercise price and market price on date of grant is the same. Further, all options under
the grant have been fully vested as of December 31, 2007.

** Net of options lapsed.

26 Patni > Annual Report 2009

Corporate Governance Report
Your Company has complied, in all material respects, with enhance the trust and confidence of the stakeholder without
features of Corporate Governance Code as per Clause 49 of compromising with laws and regulations.
the Listing Agreement with the Stock Exchanges.
The Company’s philosophy on corporate governance
A report on the implementation of the Corporate Governance encompasses achieving balance between individual interests
Code of the Listing Agreement by the Company is furnished and corporate goals through the efficient conduct of its
below. business and meeting its stakeholder obligations in a manner
that is guided by transparency, accountability and integrity.
Philosophy on Corporate Governance Accountability improves decision-making and transparency
A good corporate governance process aims to achieve helps to explain the rationale behind decisions and to build
balance between shareholders’ interest and corporate goals stakeholder confidence.
by providing long-term vision of its business and establishing
At Patni Computer Systems Limited, we strive towards
systems that help the Board in understanding and monitoring
excellence through adoption of best governance and
risk at every stage of the corporate evolution process to
disclosure practices.

A. Board of Directors
1. Composition of directors
The Board of Directors of the Company (“the Board”) has an optimum combination of directors. In order to ensure the
independence of the Board, half of the directors are Independent Directors.

At present, the Board consists of twelve members. The relevant details in respect of the existing composition of the Board are
furnished below.

Name of the director Position / Category Number of directorships in other companies*

Mr. Narendra K Patni 1 Chairman 4

Mr. Jeya Kumar 2 Chief Executive Officer 1
Mr. Gajendra K Patni 3 Non - Executive Director 2
Mr. Ashok K Patni 3 Non - Executive Director 3
Mr. William O Grabe 4 Non – Executive Director 6
Mr. Louis Theodoor van den Boog 5 Non- Executive Director 4
Mr. Arun Duggal Independent Director 13
Mr. Pradip Shah Independent Director 16
Mr. Ramesh Venkateswaran Independent Director –
Dr. Michael A Cusumano Independent Director 1
Mr. Pradip Baijal 6 Independent Director 2
Mr. Vimal Bhandari 7 Independent Director 6

1. Mr. Narendra K Patni is promoter and Chairman.

2. Appointed as a Director of the Company, not liable to retire by rotation, w.e.f. 25 June 2009.
3. Promoter.
4. Mr. Abhay Havaldar acts as an alternate director to Mr. William O Grabe.
5. Resigned as an Executive Director w.e.f. 20 February 2009 but continues to be Non-Executive Director.
6. Appointed as a Director of the Company w.e.f. 25 June 2009, liable to retire by rotation.
7. Pursuant to Section 260 of the Companies Act, 1956, appointed as an Additional Director of the Company w.e.f. 15 January 201 0.

* This includes directorships held in public limited companies, foreign companies and subsidiaries of public limited companies b ut excludes
directorships held in private limited companies.

> 27
 Changes in composition of the Board during the year ended 31 December 2009.
Mr. Pradip Shah was subsequently re-appointed as a director (liable to retire by rotation) at the Annual General Meeting held
on 25 June 2009.
Mr. Jeya Kumar and Mr. Pradip Baijal were appointed as Directors of the Company w.e.f. 25 June 2009.
Mr. Arun Maira ceased to be a Director of the Company w.e.f. 22 July 2009.

2. Number of Board Committees of the Company and of other companies on which directors are Member or
Chairman.

Name of the director Number of board Number of board Number of board Number of board
committees on committees on committees of committees of
which Chairman which Member other companies other companies
on which Chairman on which Member

Mr. Narendra K Patni NIL NIL NIL NIL

Mr. Jeya Kumar NIL NIL NIL NIL
Mr. Gajendra K Patni NIL NIL NIL 1
Mr. Ashok K Patni NIL NIL NIL 1
Mr. William O Grabe* NIL 1 NIL NIL
Mr. Louis Theodoor van den Boog NIL 1 NIL NIL
Mr. Arun Duggal# NIL 1 1 2
Mr. Pradip Shah# 1 NIL 2 5
Mr. Ramesh Venkateswaran# NIL NIL NIL NIL
Dr. Michael A Cusumano NIL NIL NIL NIL
Mr. Pradip Baijal^ 1 NIL 1 NIL
Mr. Vimal Bhandari# NIL 1 1 4
Mr. Arun Maira@ NIL NIL NIL NIL

* Mr. Abhay Havaldar acts as an alternate director to Mr. William O Grabe.

# Mr. Arun Duggal ceased to be the Chairman of the Audit Committee w.e.f. 10 February 2010. However, he continues to be the Mem ber of
the Audit Committee. Mr. Pradip Shah was appointed as the Chairman of the Audit Committee w.e.f. 10 February 2010. Mr. Ramesh
Venkateswaran has ceased to be the Member of the said Committee w.e.f. 10 February 2010 and as on same date, Mr. Vimal Bhandari was
inducted on the Audit Committee as a Member.
^ Mr. Pradip Baijal was appointed as the Chairman of the Shareholders’/ Investors’ Grievance Committee w.e.f. 29 July 2009.
@ Mr. Arun Maira ceased to be a Director of the Company w.e.f. 22 July 2009. Consequently, he also ceased to be the Chairman of the
Shareholders’/ Investors’ Grievance Committee.

Note: (As required under the Listing Agreement)

1. For the purpose of considering the limit of the committees on which a director can serve, all public limited companies, whet her listed or not,
have been included and all other companies including private limited companies, foreign companies and companies under Section 2 5 of the
Companies Act have been excluded.
2. For the purpose of considering the limit on memberships of the committees, the Audit Committee and the Shareholders’ / Inves tors’
grievance committee alone are considered.

3. Number of board meetings held and the dates on information as stipulated under clause 49 of the Listing
which such meetings were held: Agreement was made available to the members of the Board.
Four board meetings were held during the year ended The dates of such board meetings were 11-12 February 2009,
31 December 2009 with a time gap of not more than four 28-29 April 2009, 29-30 July 2009, and 31 October 2009.
months between any two meetings and the required

28 Patni > Annual Report 2009

4. Attendance of each director at the board meetings and the last AGM
Name of the director Total board meetings Total board Annual General
held during tenure meetings Attended Meeting on
25 June 2009
Mr. Narendra K Patni 4 4 
Mr. Jeya Kumar* 2 2 
Mr. Gajendra K Patni 4 4 
Mr. Ashok K Patni 4 4 X
Mr. William O Grabe 4 2 X
Mr. Louis Theodoor van den Boog 4 4 X
Mr. Arun Duggal 4 4 
Mr. Pradip Shah 4 3 
Mr. Ramesh Venkateswaran 4 4 
Dr. Michael A Cusumano 4 4 X
Mr. Pradip Baijal* 2 2 
Mr. Vimal Bhandari # NA NA NA
Mr. Arun Maira @ 2 2 X
Mr. Abhay Havaldar
(Alternate Director to Mr. William O Grabe) 4 2 X
NA – Not Applicable
* Mr. Jeya Kumar & Mr. Pradip Baijal were appointed as Directors of the Company w.e.f. 25 June 2009.
# Mr. Vimal Bhandari was appointed as a Director of the Company w.e.f. 15 January 2010.
@ Mr. Arun Maira ceased to be a Director of the Company w.e.f. 22 July 2009.

5. Compensation to Directors
Details of compensation paid to Directors for the year ended 31 December 2009 as below:
Director Relationship Business Loans &
with other directors relationship advances
with the from the Sitting Fees* Remuneration* Commission*
Company Company
Mr. Narendra K Patni Brother of Promoter NIL NIL Refer note 3 NIL
Mr. Gajendra K Patni
and Mr. Ashok K Patni
Mr. Jeya Kumar No None NIL NIL Refer note 2 NIL
Mr. Gajendra K Patni Brother of Promoter NIL Rs. 80,000 (1,787,696.50)# Rs. 8,325,000
Mr. Narendra K Patni
and Mr. Ashok K Patni
Mr. Ashok K Patni Brother of Promoter NIL Rs. 80,000 (1,787,696.50)# Rs. 8,400,000
Mr. Gajendra K Patni
and Mr. Narendra K Patni
Mr. William O Grabe No Nominee of NIL NIL NIL NIL
strategic
investor
Mr. Louis Theodoor No None NIL Rs. 140,000 Rs. 10,305,284 US$ 34,333
van den Boog
Mr. Arun Duggal No None NIL Rs. 160,000 NIL US$ 50,000
Mr. Pradip Shah No None NIL Rs. 140,000 NIL US$ 45,000
Mr. Ramesh No None NIL Rs. 240,000 NIL US$ 50,000
Venkateswaran
Dr. Michael No None NIL Rs. 160,000 NIL US$ 40,000
A Cusumano
Mr. Pradip Baijal No None NIL Rs. 80,000 NIL US$ 22,137
Mr. Arun Maira@ No None NIL Rs. 60,000 NIL US$ 20,000
*Gross amounts subjected to applicable TDS.
@ Mr. Arun Maira ceased to be a Director of the Company w.e.f. 22 July 2009.
# Adjustment to pension liability on account of actuarial valuations.

> 29
 Notes: The Chairman of Compensation & Remuneration
1. Payment to Non-Executive Directors: Committee: $ 5,000/- p.a.
The Company pays US$ 40,000 as an annual commission to The Chairman of Shareholders’ and Investors’ Grievance
its Independent Directors as approved by the Board within Committee: $ 5,000/- p.a.
the limits approved by the Members of the Company. The In addition to the above, the Independent directors are also
amount of such commission, taken together for all non- eligible for stock option grants under Company’s Stock
executive directors, shall not exceed 1% of the net profits of Option Plan i.e. Patni ESOP 2003 (Revised 2009).
the Company in financial year. The Independent Directors are
2. Payment to Chief Executive Officer:
also paid a sitting fee of Rs. 20,000 per meeting, being the
During the year, the Company has appointed Mr. Jeya Kumar
maximum amount permissible under the present regulations,
as a ‘Manager’ with the designation as ‘Chief Executive
for attending the Board /Committee meetings. In addition to
Officer’ w.e.f. 20 February 2009 and paid remuneration to
abovementioned commission, following are entitled for a one
him within the limits envisaged under the applicable
time annual commission as under.
provisions of the Companies Act, 1956. The remuneration
The Chairman of the Audit Committee: $ 10,000/ - p.a. paid was approved by the Board within the limits approved
Members of the Audit Committee: $ 5,000/- p.a. by the Members of the Company.

The breakup of remuneration paid to him in capacity of Chief Executive Officer of the Company is as under:
(Amounts in Rs.)
Fixed Components
Salary, Allowances & Perquisites PF contribution Pension Total

Mr. Jeya Kumar 119,736,859 2,177,836 – 121,914,695

3. Compensation to Mr. Narendra K Patni was paid by Patni co-investment rights in which Mr. van den Boog invested in
Americas Inc., a wholly owned subsidiary of the Company. various General Atlantic LLC investment vehicles, including
The Compensation is as described in the financial statements. one that is an investor in General Atlantic Mauritius Limited,
as a result he has an approximate 0.2% ownership interest in
Non-Executive Directors’ Shareholding in the Company
General Atlantic Mauritius Limited.
for the year ended 31 December 2009
Stock Options Grant
Name of Non-Executive Director No. of Equity Shares
The Company had introduced PATNI ESOP 2003 for
Mr. Narendra K Patni# 20,697,998 employees of the Company / subsidiaries including non-
Mr. Gajendra K Patni# 19,345,102 executive directors of the Company in terms of SEBI
Mr. Ashok K Patni# 20,048,102 Guidelines on ESOP. In pursuance of PATNI ESOP 2003, the
Company issued an initial grant of 20,000 Options each to
Mr. William O Grabe Nil
then Independent Directors on 1 July 2004 as approved by
Mr. Louis Theodoor van den Boog* Nil
the Board at the exercise price of Rs. 254 per share. 25% of
Mr. Arun Duggal Nil
the options granted in July 2004 as mentioned above, vested
Mr. Pradip Shah Nil
each in July 2005, July 2006, July 2007 and July 2008.
Dr. Michael A Cusumano Nil
Mr. Ramesh Venkateswaran 7,700 The Board of Directors, at its meeting held on 26 April 2005,
approved initial grant of 20,000 options to Mr. Louis
Mr. Pradip Baijal Nil
Theodoor van den Boog on joining the Board and 5,000
#shareholding includes shares held by their relatives.
options each to other Independent Directors, at the exercise
*Mr. van den Boog holds 48,002 equity shares of the
price of Rs.381 per share. 25% of the options granted in April
Company as on 31 December 2009. This shareholding was
2005 as mentioned above, vested each in April 2006, April
acquired by Mr. van den Boog through previous
2007, April 2008 and April 2009.

30 Patni > Annual Report 2009

The Board of Directors, at its meeting held on 25 April 2006, The Members of the Company has approved the
approved the grant of 5,000 options each to then abovementioned grant by passing special resolution at the
Independent Directors, at the exercise price of Rs.458 per Annual General Meeting held on 25 June 2009. 25% of
share. 25% of the options granted in April 2006 as abovementioned Equity Linked Options and 50% of RSUs
mentioned above, vested each in April 2007, April 2008, have been vested in March 2010.
April 2009 and April 2010.
The Members of the Company, at their Meeting held on 25
Subsequent to listing of Company’s ADRs on New York Stock June 2009, approved the resolution in which the Board of
Exchange (NYSE), Members of the Company at their Annual Directors of the Company are authorized on behalf of the
General Meeting held on 21 June 2006, approved the Company to issue and allot additional 8,000,000 Equity
amendment to Patni ESOP 2003 (“Patni ESOP 2003 - Revised Shares of nominal value of Rs. 2/- each to the permanent
2006”) (“the Plan”) to enable the Company to issue the ADR employees of the Company (including Executive and Non-
linked Options upto limits provided in the said shareholders Executive Directors but excluding the Promoter Directors)
resolutions. under a ‘Patni ESOP 2003 (Revised 2009)’ (“Revised Plan
2009”) created by the Company for the benefit of the
Pursuant to the Plan, Mr. Arun Maira, on joining the Board,
employees, inter alia, on the terms and conditions as set out
was granted 20,000 options at an exercise price of Rs. 336/-
in the said Patni ESOP Plan. The Members also resolved that
per share. The effective date of above grant was 1 July 2006.
options granted to Non-Executive Directors, including
25% of the options granted to Mr. Arun Maira vested in July
Independent Directors, shall not exceed 150,000 options in a
2007, July 2008 and July 2009.
financial year and in aggregate shall not be more than
The Board of Directors, at its meeting held on 24 April 1,500,000 under the said Revised Plan 2009.
2007, approved the grant of 5,000 options each to then
The Board of Directors, at its meeting held on 10 February
Independent Directors, at the exercise price of Rs. 455/- per
2010, approved the grant of 20,000 options each to
share. 25% of the options granted in April 2007 as
Mr. Vimal Bhandari and Mr. Pradip Baijal at an exercise
mentioned above vested in April 2008, April 2009 and
price of Rs. 471/- each and 5,000 options each to other
April 2010.
4 Independent Directors as on said date, at the exercise price
The Members of the Company, at their meeting held on 26 of Rs. 471/- per share or US$ 20.78 per ADR, as the case may
June 2008, approved the amendment to the Plan to enable be. None of the said options have been vested so far.
the Company to issue the Restricted Stock Units (RSUs) at an
All the options which have been granted except the RSUs
exercise price of Rs. 2/- each under the Patni ESOP 2003 –
granted to Mr. Jeya Kumar, vest in four equal annual
Revised 2008 (the “Revised Plan”).
instalments beginning one year from the date of grant. The
The Compensation and Remuneration Committee of Directors RSUs granted to Mr. Jeya Kumar will vest in two equal annual
vide its resolution dated 25 November 2008, approved the installments beginning one year from the date of grant. The
grant of 96,000 RSUs to Mr. Louis Theodoor van den Boog, options can be exercised within five years from the date of
at an exercise price of Rs. 2/- per share. 25% of the above vesting.
mentioned RSUs have been vested in November 2009. The
Code of Conduct:
balance 75% of the above mentioned RSUs have been vested
Pursuant to the requirements of the Clause 49 of the Listing
in April 2010.
Agreement, the Board has adopted Code of Business Conduct
The Compensation and Remuneration Committee of Directors and Ethics for the executive directors, whole time directors,
vide resolution dated 10 March 2009, has approved the grant officers and employees of the Company as well as the
of 1,500,000 Equity Linked Options at an Exercise Price of Rs. separate Code of Business Conduct and Ethics for Non-
106/- per share and 350,000 RSUs at a par value of shares Executive Directors of the Company. The said Code has been
i.e. Rs. 2/- per share to Mr. Jeya Kumar, CEO, under the Plan. posted on website of the Company.

> 31
 All the Board Members and senior management personnel I. Purpose
have affirmed compliance with the Code for the year 2009 The primary purpose of the Audit Committee is to assist the
and a declaration to this effect signed by the CEO of the Board of Directors (the “Board”) of Patni Computer Systems
Company is provided at the end of this report. Limited, (the “Company”), in fulfilling its oversight
responsibilities with respect to (a) the accounting and
Tenure:
financial reporting processes of the Company, including the
As per the provisions of the Companies Act, 1956 and the
integrity of the audited financial statements and other
Articles of Association of the Company, two third of the total
financial information provided by the Company to its
directors of the Company retire by rotation. Out of this two
stockholders, the public, any stock exchange and others,
third, one third will be retiring at every Annual General
(b) the Company’s compliance with legal and regulatory
Meeting. Accordingly, the tenure of each director is two years
requirements, (c) the Company’s independent auditors’
but they are eligible for re-appointment.
qualifications and independence, (d) the audit of the
In accordance with the Articles of Association of the Company’s financial statements, and the performance of the
Company, Mr. Narendra K Patni, Mr. Gajendra K Patni and Company's internal audit function and its independent
Mr. Ashok K Patni are permanent members of the Board. auditors.
Further, Mr. Louis Theodoor van den Boog was appointed as II. Organization
an Executive Director of the Company w.e.f. 29 April 2008. The Audit Committee shall have minimum of three Directors
However, he ceased to be an Executive Director w.e.f. 20 as its Members. All Members of the Audit Committee shall be
February 2009 and he continues to be Non-Executive Director independent directors and shall be financially literate and at
liable to retire by rotation. least one member shall have accounting or related financial
Mr. Jeya Kumar was appointed as ‘Manager’ with the management expertise. The Board shall appoint a chairperson
designation as ‘Chief Executive Officer’ w.e.f. 20 February of the Audit Committee and in the absence of such person,
2009 for the period of five years pursuant to the provisions of the members of the Audit Committee shall appoint one of
the Companies Act, 1956. He was further appointed as a their members present as the Chairman by a vote of the
Director of the Company, not liable to retire by rotation, at majority of the full Audit Committee. The Chairman of the
an Annual General Meeting held on 25 June 2009. Audit Committee shall be present at the Annual General
Meeting of the Company to answer shareholders’ queries.
B. Audit Committee The Audit Committee may invite such of the executives, as it
1. Brief description of terms of reference
considers appropriate (and particularly the CFO) to be present
The Audit Committee was initially set up on 19 December
at the meetings of the committee, but on occasions it may
2001 and reconstituted on 12 November 2003 in line with
also meet without the presence of any executives of the
the then corporate governance norms. Subsequently, the
company. The CFO, head of Internal Audit and representative
Audit Committee was further reconstituted on 30 March
of the Statutory Auditor may be present as invitees for the
2005, 29 April 2008 and recently on 10 February 2010. The
meetings of the Audit Committee.
Audit Committee has three non-executive members, all being
independent. The Chairman of the Committee is an III. Meetings
independent director. All members of the Audit Committee The Audit Committee should meet at least four times in a
are financially literate and they have accounting or related year and not more than four months shall elapse between
financial management expertise. two meetings. The Quorum shall be either two members or
one third of the members of the Audit Committee whichever
Existing Charter of the Audit Committee, including terms of
is greater.
reference, is as under:

32 Patni > Annual Report 2009

IV. Authority and Responsibilities
Subject to and in accordance with Clause 49 of the listing agreement

Description Period
A. With Respect to the Management
1. Review the annual financial statements before submission to the board for approval Annually
2. Review the quarterly financial statements before submission to the board for approval Quarterly
3. Review and discuss the major issues w.r.t accounting principles and financial As appropriate
statement presentations and changes in accounting principles and polices.
4. Review disagreements or on audit problems, if any, for preparation of financial statements etc As appropriate
5. Review Company’s legal Compliance Report and any matters which could impact As appropriate
Company’s financial statements.
6. Review the Company’s Earnings press releases and other information provided to analysts As appropriate
and rating agencies.
7. Review and discuss w.r.t off-balance sheet transaction, arrangements, obligations etc As appropriate
8. Review steps to monitor, control and manage major financial risk and corrective measures As appropriate
B. With Respect to the Independent Auditors
1. Appointment, compensation and oversight of the work of Independent Auditors As appropriate
2. Evaluate Performances of Independent Auditors including lead audit partner Annually
3. Ensure objectivity & independence of Independent Auditors, and receive a Annually
statement of Independence from them
4. Review Appropriate Internal Quality Control procedures of Independent Auditors Annually
5. Confirm Rotation requirement of Partners & Independent Auditors and hiring of As appropriate
former employees of Independent Auditors
6. Review of any report submitted by Independent Auditors As appropriate
7. Before commencement of Internal Audit, review the scope & plan of work of Annually
Independent Auditors
8. Post audit discussion with Independent Auditors to ascertain areas of concern Annually
9. Review Alternative Accounting treatments of Financial information reported in As appropriate
US GAAP and treatment advised by Independent Auditors
10. Ensuring the quality and appropriateness of the Company’s accounting and financial disclosures As appropriate
C. With Respect to the Internal Auditors
1. Appointment of Head of Internal Audit and review of scope of work and his responsibilities Annually
2. Review the scope & plan of work of Internal Audit Group including staffing & budget At least Annually
3. Evaluate Performance of Internal Audit Group At least Annually
4. In discussion with internal auditors Review of the adequacy of Company’s internal controls As appropriate
5. Review the process of complaints regarding internal accounting controls and auditing matters As appropriate
6. Review effectiveness of the Company’s internal control over financial reporting Annually
7. Review Management certification and disclosures Annually
8. Review on the issues raised in management letters and corrective steps As appropriate
9. Review on significant findings of the Internal Audit Group As appropriate

> 33
 Description Period
D. Other
1. Review all related party transactions required under SEC rules and SEBI Annually
2. Examine reasons behind any substantial defaults As appropriate
3. Review the details of investment surplus fund and IPO proceeds As appropriate
4. Recommend to BOD amendment to, or waiver of, Company’s code of Ethics. As appropriate
5. Review adequacy of Charter annually and review its performance Annually
6. Report regularly with respect to the quality or integrity of the Company’s financial As appropriate
statements & perform other activities.
7. Review the financial statements of any material non-listed Indian subsidiary As appropriate

V. Resources Name of the Member Total Committee Total

The Audit Committee shall have the sole authority to retain or meetings held Committee
terminate consultants to assist the Audit Committee in its during tenure meetings
functions. The terms of engagement and payment terms of of member attended
such consultants will be determined by the Audit Committee.
Mr. Pradip Shah 4 4
The Company Secretary shall act as the Secretary to the Audit
Mr. Arun Duggal 4 4
Committee.
Mr. Vimal Bhandari – –
2. Composition, names of Members and Chairman
Mr. Ramesh Venkateswaran 4 4
The Board of Directors of the Company at its Meeting held
on 10 February 2010 has, inter alia, approved following
C. Compensation and Remuneration
changes in the composition of the Audit Committee of the
Directors:
Committee
1. Brief description of terms of reference and
Mr. Arun Duggal has ceased to be the Chairman of the remuneration policy
Audit Committee. However, he continues to be the
The Compensation and Remuneration Committee was set up
Member of the Audit Committee;
on 30 July 2006 by merging the Remuneration Committee
Mr. Pradip Shah has been appointed as the Chairman of and the Compensation Committee. The Committee has
the Audit Committee;
overall responsibility for approving and evaluating
Mr. Vimal Bhandari, an independent Director, has been compensation plans, policies and programs of the CEO and
appointed as a Member of the Audit Committee; and senior management of the company. The Committee shall
Mr. Ramesh Venkateswaran has ceased to be the Member make recommendations to the Board on Stock Option plans
of the Audit Committee. for all employees. The Committee shall also facilitate the
Accordingly, the current composition of the Audit Committee recommendation of compensation for Board members.
of the Company is as under:
The Committee has three non–executive members with all
Name of the Member Designation Category being independent and the Chairman of the Committee is an
Mr. Pradip Shah Chairman Independent Director Independent Director. Mr. Arun Maira ceased to be the
Member of Compensation and Remuneration Committee
Mr. Arun Duggal Member Independent Director
w.e.f. 22 July 2009 and Mr. Pradip Baijal was inducted as a
Mr. Vimal Bhandari Member Independent Director Member of the said Committee w.e.f. 29 July 2009. Mr. Jeya
3. Meetings and attendance during the year Kumar was inducted as a Permanent Invitee of the Committee
Four meetings were held during the year ended 31 December w.e.f. 29 July 2009.
2009.

34 Patni > Annual Report 2009

2. Present Composition, names of Members and 1. Name of non-executive director heading the
Chairman Committee:
Name of the Member Designation Category Mr. Pradip Baijal was appointed as the Chairman of the
Mr. Ramesh Chairman Independent Director Committee w.e.f. 29 July 2009. Mr. Arun Maira ceased to be
Venkateswaran the Chairman of the said Committee w.e.f. 22 July 2009.
Dr. Michael A Member Independent Director
2. Present Composition, names of the Members and
Cusumano
Chairman:
Mr. Pradip Baijal Member Independent Director
Name of the Member Designation Category
3. Meetings and attendance during the year Mr. Pradip Baijal Chairman Independent Director
Four meetings were held during the year ended 31 December
Mr. Louis Theodoor Member Non - Executive
2009
van den Boog Director
Name of the Member Total Committee Total
Mr. William O Grabe* Member Non – Executive
meetings held Committee
Director
during tenure meetings
of member attended *Mr. Abhay Havaldar acts as an alternate director to Mr.
Mr. Ramesh Venkateswaran 4 4 William O Grabe.

Dr. Michael A Cusumano 4 4 3. Name and designation of Compliance Officer

Mr. Pradip Baijal 1 1 Mr. Arun Kanakal, Vice President & Company Secretary
Mr. Arun Maira 2 1 Akruti Softech Park, MIDC Cross Road No.21,
MIDC, Andheri (East),
D. Shareholders’/ Investors’ Grievance Mumbai - 400 093.
Committee Tel: 91 022 66930500
Shareholders’/Investors’ Grievance Committee was set up on Fax: 91 022 28321750
12 November 2003 and was reconstituted on 30 July 2006, E-mail: arun.kanakal@patni.com
30 October 2007, 29 April 2008, 22 October 2008 and
4. Details of investors’ queries / complaints received
recently on 29 July 2009. The Committee consists of three
directors, the majority being non-executive directors. The
and resolved during the year ended 31 December
Chairman of the Committee is an Independent Director. The 2009:
Committee met on 31 October 2009 to ensure timely and This information has been provided under Shareholders’
efficient resolving of investor complaints. Information.

E. General Body Meetings

1. Details of last three Annual General Meetings of the Company:

Annual General Meetings for the last three years

Date 25 June 2009 26 June 2008 21 June 2007

Location Hotel Le Meridien, R.B.M.Road, Hotel Le Meridien, R.B.M.Road, Hotel Le Meridien, R.B.M.Road,
Opposite Pune Railway Station, Opposite Pune Railway Station, Opposite Pune Railway Station,
Pune – 411 001 Pune – 411 001 Pune – 411 001

Time 11.30 am 11.30 am 11.30 am

> 35
 2. Whether any special resolution passed in the 3. As stated earlier, the Board has adopted Code of Business
previous three AGMs? Conduct and Ethics for the executive directors, whole time
Yes directors, officers and employees of the Company as well as
the separate Code of Business Conduct and Ethics for Non-
3. Whether any special resolution passed last year
Executive Directors of the Company. The provisions relating to
through postal ballot – details of voting pattern?
Whistle Blower Policy have been adequately provided and no
No
personnel has been denied access to the Audit Committee.
4. Who conducted the postal ballot?
4. Disclosure on non-mandatory requirements:
Not Applicable
a) None of the independent director on the Board of the
5. Whether any special resolution is proposed to be Company has served for a tenure exceeding nine years.
conducted through postal ballot? The Company has ensured that the person who is being
No appointed as an independent director has the requisite
6. Procedure for postal ballot? qualifications and experience which would be of use to the
Not Applicable Company and which in the opinion of the Company,
would enable him to contribute effectively to the Company
F. Disclosures in his capacity as an Independent Director.
1. Disclosures on materially significant related party b) The Company has set up a Compensation & Remuneration
transactions that may have potential conflict with committee, details of which are provided elsewhere in this
the interests of the company at large Report.
Disclosures regarding Related Party Transactions have been
made under notes to financial statements of the Company, c) We publish our quarterly and half yearly results in widely
which form part of this Annual Report. circulated newspapers and also display our results on our
website. We did not send half yearly results to the
2. Details of non-compliance by the company, shareholders in the year 2009.
penalties and strictures imposed on the company
by the stock exchange or SEBI or any statutory d) The financial statements of the Company are unqualified.
authority, on any matter related to capital e) As stated earlier, the Company has adopted a Whistle
markets, during the last three years. Blower Policy and has established the necessary
No penalties and strictures have been imposed on the mechanism for employees to report concerns about any
Company by the stock exchange, SEBI or any statutory malpractice, impropriety, abuse etc. The said Policy is also
authority on any matter related to capital markets as there appropriately communicated within the Company across
was no non-compliance by the Company. all levels and has been displayed on Company’s intranet
and website.

G. Shareholders’ Information
Date and time of AGM : 23 June 2010, Wednesday at 11.30 a.m.

Venue : Hotel Le Meridien, R.B.M.Road, Behind Pune Railway Station, Pune - 411001

Financial year : 1 January 2009 to 31 December 2009

Book closure dates : 16 June 2010 to 23 June 2010 (both days inclusive)

Registered office : S-1A, F-1, Irani Market Compound, Yerawada, Pune – 411 006

Dividend payment date : On or after 28 June 2010, but within the statutory time limit of 30 days

Compliance officer : Mr. Arun Kanakal, Company Secretary is the Compliance Officer of the Company.

Website address : www.patni.com

36 Patni > Annual Report 2009

Means of communication Outside India:
The Company’s website www.patni.com contains an The Company’s ADSs are listed on:
Investors’ section containing financials, press releases,
The New York Stock Exchange (NYSE)
shareholding pattern, news about the Company and certain
11 Wall Street, New York
other shareholder information.
NY 10005, US.
The Company has been sharing the relevant information on Tel: 1 212 6563000
the “Corporate Filing and Dissemination Systems website viz.
Website: www.nyse.com
www.corpfiling.co.in ” launched by BSE and NSE.
Listing fees for the year 2009-10 have been paid to the stock
The Securities and Exchange Commission, US (‘SEC’)
exchanges where the Company’s shares are listed.
maintains a website at www.sec.gov that contains all
information and filings done by the registrants that make Stock code:
electronic filings with the SEC using its EDGAR system. The BSE : 532517
periodical filings of the Company with SEC are also available
NSE : PATNI
on the Company’s website.
ISIN nos. in NSDL and CDSL : INE660F01012
All press releases and events can be accessed under the
NYSE (ADR) : PTI
heading “News and Events” in Investors’ section on the
Company’s website. Reuters:
Financial results are generally published in Economic Times, Symbol Company name Prime
Free Press Journal (the National newspapers), Navshakti and Exchange
Maharashtra Times (Vernacular newspapers). PTNI.NS PATNI COMPUTER SYSTEMS LTD NSE
As required by sub-clause V of Clause 49 of the Listing PTNI.BO PATNI COMPUTER SYSTEMS LTD BSE
Agreement, Management Discussion and Analysis is provided PTI.N PATNI COMPUTER SYSTEMS LTD New York
elsewhere in the Annual Report. Stock Exchange
As on 31 December 2009, there were 38,176 shareholders Bloomberg Code: PATNI:IN, PTI:US.
holding our equity shares.
Dematerialisation of equity shares
The Company’s shares fall under category B of scrip in The Company’s shares are under compulsory
BSE and are listed on the following stock exchanges: dematerialisation list and can be transferred through
In India: depository system. The Company has entered into a tripartite
agreement with National Securities Depository Limited (NSDL)
1. Bombay Stock Exchange Limited (BSE)
and Central Depository Services (India) Limited (CDSL) to
Phiroze Jeejeebhoy Towers
Dalal Street, Fort facilitate the dematerialisation of shares. As on 31 December
Mumbai – 400001 2009, 99.99% shares were held in electronic form.
Tel: 91 22 2272 1233/1234 Contact Details:
Fax: 91 22 2272 3719
For any queries regarding shares:
Website: www.bseindia.com
Registrar and Transfer Agent:
2. National Stock Exchange of India Limited (NSE)
Karvy Computershare Private Limited
Exchange Plaza,
Unit : Patni Computer Systems Limited
Plot No.C/1, G Block,
Plot No.17 - 24, Vittal Rao Nagar, Madhapur
Bandra Kurla Complex, Bandra (E)
Mumbai – 400 051 Hyderabad - 500 081, India.
Tel: 91 22 2659 8235 / 36 Tel: 91 40 2342 0815-820
Fax: 91 22 2659 8237 / 38 Fax: 91 40 2342 0814
Website : www.nseindia.com Email: igkcpl@karvy.com

> 37
 Company Secretary and Compliance Officer: Dividend
Arun Kanakal The Board of Directors is pleased to recommend the payment
Patni Computer Systems Limited of dividend for the year ended 31 December 2009 @ Rs. 3
Akruti Softech Park, per share or 150 percent. This dividend, if approved at the
MIDC Cross Road No.21, Annual General Meeting, shall be paid to all eligible Members
Andheri (East), Mumbai – 400093 whose names appear on the Register of Members on 15 June
Tel: 91 22 6693 0500 2010.
Email : investors.redressal@patni.com
Dividend through Electronic Clearing Service (ECS):
For queries relating to Financial Statements: The Company shall provide the facility of ECS to those
Tanmoy Chowdhury shareholders in the locations where ECS is available.
Patni Computer Systems Limited
For balance locations, the Company shall issue dividend
Akruti Softech Park,
warrants. These warrants will be valid for a period of 90 days
MIDC Cross Road No.21,
from the payment date. On the expiry of the validity period of
Andheri (East), Mumbai – 400093
the dividend warrants, these may be sent back to our
Tel: 91 22 6693 0500
Registrars and Transfer Agents for issue of demand drafts in
Email: investors.redressal@patni.com
lieu of the same at:
Investor correspondence in the U.S.:
Karvy Computershare Private Limited
Gaurav Agarwal
Unit : Patni Computer Systems Limited
Patni Computer Systems Limited
Plot No.17 - 24
One Broadway,
Vittal Rao Nagar, Madhapur
Cambridge MA 02142
Hyderabad - 500 081, India
Tel: 1 617 914 8360
Tel: 91 40 2342 0815-820
e-mail : ir@patni.com
Fax: 91 40 2342 0814
Name and address of the Depositary Bank for the Email: igkcpl@karvy.com
purpose of ADS: Patni Insider Trading Policy:
The Bank of New York Mellon Investor Services The Company has implemented an Insider Trading Policy to
P.O. Box 11258 comply with all relevant Insider Trading Regulations. In
Church Street Station accordance with the policy, the Company announces quiet
New York, NY 10286-1258 period for designated employees from time to time.
Toll Free Tel # for domestic callers: 1 888 269 2377
The Company has a policy of observing a ‘quiet period’ from
International Callers can call: 1 201 680 6825
the last day of the end of the quarter till two trading days
Email: shrrelations@bnymellon.com
after the financial results are published. The Company may
Websites: http://www.bnymellon.com\shareowner
also announce ‘quiet period’ during and after the occurrence
Name and address of the Custodian in India for the of certain events mentioned in the Insider Trading Policy.
purpose of ADS:
The Company is continuously monitoring its Insider Trading
The Hongkong and Shanghai Banking Corporation Ltd
Policy.
Custody and Clearing
HSBC Securities Services
2nd Floor, 'Shiv', Plot No 139-140 B
Western Express Highway, Sahar Road Junction,
Vile Parle (E), Mumbai - 400 057
Tel: 91 22 4035 7637/40/49/27
Fax: 91 22 4035 7469/ 70

38 Patni > Annual Report 2009

Details of complaints received and resolved from 1 January 2009 to 31 December 2009:
Complaints Received Attended to Pending
Non-Receipt of Dividend Warrants 44 44 0
Non-Receipt of Annual Report 12 12 0
Non-Receipt of Securities 0 0 0
Non-Receipt of Refund Order 5 5 0
Non- Receipt of Electronic Credit 0 0 0
Receipt of Refund Orders/DWs for corrections 13 13 0
Complaints Received from SEBI 0 0 0
Complaints Received from Stock Exchanges 0 0 0
Total 74 74 0

Shareholding Pattern as on 31 December 2009:

Category Number of Shares % to Total
Promoters and Relatives of Promoters 60,091,202 46.54
Mutual Funds/ UTI 7,654,442 5.93
Financial Institutions /Banks 10,550 0.01
Insurance Companies 1,428,954 1.11
Foreign Institutional Investors 15,492,659 12.00
Bodies Corporate 1,528,563 1.18
Individuals 3,159,974 2.45
NRIs 129,182 0.10
Foreign Corporate Bodies 2,752,081 2.13
Directors 7,700 0.00
Trusts and Clearing Members 134,199 0.10
Shares underlying ADRs* 36,555,172 28.31
Others 181,354 0.14
Total 129,126,032 100.00
* Includes 20,161,868 underlying shares held by Bank of New York for General Atlantic Mauritius Limited being the beneficiary.

Market Price Data:

Monthly highs, lows and volumes for Financial Year 2009
BSE NSE Total Volume
Month High Low Volume High Low Volume (BSE+NSE)
Rs. Rs. Nos. Rs. Rs. Nos. Nos.
January-09 142.90 108.00 387,508 142.00 109.00 1,404,122 1,791,630
February-09 125.50 97.00 1,000,131 126.05 96.55 2,144,553 3,144,684
March-09 131.95 94.00 8,386,144 132.00 94.00 7,688,524 16,074,668
April-09 171.10 127.05 1,063,223 171.40 125.10 3,628,842 4,692,065
May-09 230.70 152.00 3,973,660 231.90 158.20 10,156,227 14,129,887
June-09 279.50 199.15 1,820,810 279.50 198.40 6,466,440 8,287,250
July-09 368.45 240.05 4,710,704 368.60 239.90 16,439,314 21,150,018
August-09 463.00 335.00 7,374,711 464.70 336.00 25,325,379 32,700,090
September-09 488.00 391.00 5,354,247 488.70 349.80 22,015,927 27,370,174
October-09 522.70 391.00 3,311,662 477.20 389.05 16,049,271 19,360,933
November-09 515.00 418.00 4,186,272 518.85 415.55 19,597,293 23,783,565
December-09 496.00 440.20 1,824,179 495.45 440.00 8,669,771 10,493,950

> 39
 Market movement:
Stock market data relating to equity shares listed in India
Chart on Patni share price Vs. Sensex and Nifty from 1 January 2009 to 31 December 2009

Patni Price Vs. Sensex

525

438

352

265

179

92
01/01/09 16/02/09 02/04/09 22/05/09 03/07/09 14/08/09 29/09/09 13/11/09 29/12/09

Patni Computer Systems Sensex

Patni Price Vs. Nifty

521

435

349

264

178

92
01/01/09 16/02/09 02/04/09 22/05/09 03/07/09 14/08/09 29/09/09 13/11/09 29/12/09

Patni Computer Systems Nifty

Distribution of shareholding as on 31 December 2009

No. of equity shares held No. of shareholders % No. of shares %

1 – 5000 37,819 99.06 2,830,612 2.19

5001 – 10000 104 0.27 397,463 0.31
10001 – 20000 62 0.16 433,923 0.34
20001 – 30000 24 0.06 290,915 0.23
30001 – 40000 12 0.03 220,292 0.17
40001 – 50000 7 0.02 157,636 0.12
50001 – 100000 34 0.09 1,205,611 0.93
100001 and above 114 0.30 123,589,580 95.71
Total 38,176 100.00 129,126,032 100.00

40 Patni > Annual Report 2009

Outstanding ADRs
Our ADRs are traded on the NYSE under the ticker symbol “PTI”. As of 31 December 2009, Outstanding ADRs are 8,196,652.
Each ADR represents two underlying Equity Shares.

We have entered into a Deposit Agreement dated 15 July 2002 with The Bank of New York, the Depositary. Pursuant to the said
Deposit Agreement, we have deposited 20,161,868 equity shares of Rs. 2/- each with the Depositary. The Depositary has
executed and delivered to General Atlantic 20,161,868 ADRs representing such equity shares where each ADR represents one
equity share of Rs.2 per share.

The addresses of offices / locations are given elsewhere in this Annual Report.

ANNUAL DECLARATION BY CEO PURSUANT TO CLAUSE 49(I)(D)(ii)

OF THE LISTING AGREEMENT

As per the requirements of Clause 49(I)(D)(ii) of the Listing Agreement, I, Jeya Kumar, Chief Executive Officer of the Company,
hereby declare that all the Board Members and senior management personnel of the Company have affirmed compliance with
the Company's Code of Business Conduct and Ethics for the year 2009.

Sd/-

Jeya Kumar
Chief Executive Officer

Date: 27 April 2010

> 41
 Auditors’ Certificate on Corporate Governance

To the Members of Patni Computer Systems Limited

We have examined the compliance of conditions of Corporate Governance by Patni Computer Systems Limited (‘the Company’)
for the year ended on 31 December 2009, as stipulated in Clause 49 of the Listing Agreement of the said Company with Stock
Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Company for ensuring the compliance of conditions of the Corporate
Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has
complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effective ness
with which the management has conducted the affairs of the Company.

For B S R & Co.

Chartered Accountants
Firm’s Registration No: 101248W

Natrajan Ramkrishna
Partner
Membership No: 032815

Mumbai
29 April 2010

42 Patni > Annual Report 2009

The Board of Directors,
Patni Computer Systems Limited
Akruti Softech Park, MIDC Cross Road No. 21,
Andheri (E), Mumbai – 400 093.

Sub: Certification by the Chief Executive Officer (CEO) and Chief

Financial Officer (CFO) on Financial Statements of the Company for the
year ended 31 December 2009
We, Jeya Kumar, Chief Executive Officer (CEO) and Surjeet Singh, Chief Financial Officer (CFO), of Patni Computer Systems
Limited, certify that:

(a) We have reviewed financial statements and the cash flow statement for the year and that to the best of our knowledge and
belief:

i. these financial statements do not contain any materially untrue statement or omit any material fact or contain statements
that might be misleading; and

ii. these statements together present a true and fair view of the Company's affairs and are in compliance with existing
accounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year which are
fraudulent, illegal or violative of the Company's code of conduct.

(c) We are responsible for establishing and maintaining internal controls for financial reporting and that we have evaluated the
effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the
auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are
aware and the steps we have taken or propose to take to rectify these deficiencies.

(d) We have indicated to the auditors and the Audit Committee:

i. significant changes in internal control over financial reporting during the year;

ii. significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financi
al
statements; and

iii. instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or
an employee having a significant role in the Company's internal control system over financial reporting.

Sd/- Sd/-
Jeya Kumar Surjeet Singh
Chief Executive Officer Chief Financial Officer

Place: Mumbai
Date: 10 February 2010

> 43
 Financial Section

44 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Standalone Financials under Indian GAAP

Auditors’ Report

To the Members of
Patni Computer Systems Limited

We have audited the attached Balance Sheet of Patni d) in our opinion, the Balance Sheet, Profit and Loss Account
Computer Systems Limited (‘the Company’) as at 31 December and Cash Flow Statement dealt with by this report comply
2009, the Profit and Loss Account and the Cash Flow with the Accounting Standards referred to in subsection
Statement for the year ended on that date annexed thereto. (3C) of Section 211 of the Act;
These financial statements are the responsibility of the
e) on the basis of written representation received from the
Company’s management. Our responsibility is to express an
directors of the Company, as at 31 December 2009 and
opinion on these financial statements based on our audit.
taken on record by the Board of Directors, we report that
We conducted our audit in accordance with auditing standards none of the directors are disqualified as at 31 December
generally accepted in India. Those Standards require that we 2009 from being appointed as a director in terms of clause
plan and perform the audit to obtain reasonable assurance (g) of sub-section (1) of Section 274 of the Act, and
about whether the financial statements are free of material
f) in our opinion, and to the best of our information and
misstatement. An audit includes examining, on a test basis,
according to the explanations given to us, the said
evidence supporting the amounts and disclosures in the
accounts give the information required by the Act in the
financial statements. An audit also includes assessing the
manner so required and give a true and fair view in
accounting principles used and significant estimates made by
conformity with the accounting principles generally
management, as well as evaluating the overall financial
accepted in India :
statement presentation. We believe that our audit provides a
reasonable basis for our opinion. i) in the case of the Balance Sheet, of the state of affairs
of the Company as at 31 December 2009;
As required by the Companies (Auditor’s Report) Order, 2003
(‘the Order’) issued by the Central Government of India in ii) in the case of the Profit and Loss Account, of the profit
terms of sub-section (4A) of Section 227 of the Companies Act, for the year ended on that date; and
1956 (“the Act”), we enclose in the Annexure, a statement on iii) in the case of the Cash Flow Statement, of the cash
the matters specified in paragraphs 4 and 5 of the said Order. flows for the year ended on that date.
Further to our comments in the Annexure referred to above,
we report that:

a) we have obtained all the information and explanations For B S R & Co.
which, to the best of our knowledge and belief, were Chartered Accountants
necessary for the purposes of our audit;

b) in our opinion, proper books of account as required by law

have been kept by the Company so far as appears from our
examination of those books;

c) the Balance Sheet, Profit and Loss Account and the Cash Natrajan Ramkrishna
Flow Statement dealt with by this report are in agreement Mumbai Partner
with the books of account; 11 February 2010 Membership No: 032815

> 45
 Annexure to the Auditors’ Report
(Referred to in our report of even date)

1 a) The Company has maintained proper records showing b) In our opinion, and according to the information and
full particulars, including quantitative details and explanations given to us, the transactions made in
situation, of fixed assets. pursuance of contracts and arrangements referred to
b) The Company has a regular programme of physical in (a) above and exceeding the value of Rs. 5 lakh with
verification of its fixed assets, by which all fixed assets any party during the year have been made at prices
are verified in a phased manner over a period of three which are reasonable having regard to the prevailing
years. During the current year, as part of a cyclical market prices at the relevant time.
plan, the Company has carried out physical 6 The Company has not accepted any deposits from the
verification of certain fixed assets and no material
public.
discrepancies were noticed upon such verification. In
our opinion, this periodicity of physical verification is 7 In our opinion, the Company has an internal audit system
reasonable having regard to the size of the Company commensurate with the size and nature of its business.
and the nature of its assets. 8 The Central Government has not prescribed the
c) Fixed assets disposed off during the year were not maintenance of cost records under Section 209(1) (d) of
substantial and, therefore, do not affect the going the Act, for any of the services rendered by the Company.
concern assumption. 9 a) According to the information and explanations given
2 The Company is a service company, primarily rendering IT to us and on the basis of our examination of the
consulting and software development services. records of the Company, amounts deducted/accrued
Accordingly it does not hold any physical inventories. in the books of account in respect of undisputed
Thus, paragraph 4(ii) of the Order is not applicable. statutory dues including Provident Fund, Employees’
3 The Company has neither granted nor taken any loans, State Insurance, Income-tax, Sales-tax, Wealth tax,
secured or unsecured, to/from companies, firms or other Service tax, Customs duty, Excise duty, Cess and other
parties covered in the register maintained under Section material statutory dues have been generally regularly
301 of the Act. deposited during the year by the Company with the

4 In our opinion and according to the information and appropriate authorities. As explained to us, the
explanations given to us, there is an adequate internal Company did not have any dues on account of
control system commensurate with the size of the Investor Education and Protection Fund.
Company and nature of its business with regard to According to the information and explanations given
purchase of fixed assets and with regard to sale of to us, no undisputed amounts payable in respect of
services. The activities of the Company do not involve Provident Fund, Employees’ State Insurance, Income
purchase of inventory and the sale of goods. We have not tax, Sales tax, Wealth tax, Service tax, Customs duty,
observed any major weakness in the internal control Excise duty, Cess and other material statutory dues
system during the course of the audit.
were in arrears as at 31 December 2009 for a period
5 a) In our opinion and according to the information and of more than six months from the date they became
explanations given to us, the particulars of contracts payable.
or arrangements referred to in Section 301 of the Act,
There were no dues on account of cess under section
have been entered in the register required to be
441A of the Act, since the date from which the
maintained under that section.

46 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

aforesaid section comes into force has not yet been 14 According to the information and explanations given to
notified by the Central Government. us, the Company is not dealing in or trading in shares,
securities, debentures and other investments.
b) According to the information and explanations given
to us, the following dues of Income-tax have not been 15 According to the information and explanations given to
deposited by the Company on account of disputes: us, the Company has not given any guarantee for loans
taken by others from banks or financial institutions.
Name of Nature of Demand Amount paid Period Forum where
16 The Company did not have any term loans outstanding
statute dues (Rs. in (Rs. in dispute is
during the year.
million) million) pending

Income tax Income tax 274 – Assessment Income Tax 17 According to the information and explanations given to
Act, 1961 year 2002-03 Appellate us, and on an overall examination of the balance sheet of
Tribunal the Company, we report that no funds raised on short-
Income tax Income tax 459 66 Assessment Commissioner term basis have been used for long term investment.
Act, 1961 year 2003-04 of Income Tax
18 The Company has not made any preferential allotment of
Appeals
shares to companies/ firms/ parties covered in the register
(Demand stayed)
maintained under Section 301 of the Companies Act,
Income tax Income tax 18 – Assessment Commissioner
1956.
Act, 1961 year 2003-04 of Income Tax
Appeals 19 The Company did not have any outstanding debentures
Income tax Income tax 630 – Assessment Income Tax during the year.
Act, 1961 year 2004-05 Appellate 20 We have verified the end-use of money raised by public
Tribunal issue as disclosed in the notes to the financial statements.
Income tax Income tax 1,131 171 Assessment Commissioner
21 According to the information and explanations given to
Act, 1961 year 2005-06 of Income tax
us, no material fraud on or by the Company has been
Appeals
(Demand stayed) noticed or reported during the course of our audit.

10 The Company does not have accumulated losses at the

end of the financial year and has not incurred cash losses
in the current financial year and in the immediately
preceding financial year.
For B S R & Co.
11 The Company did not have any outstanding dues to any Chartered Accountants
financial institution, banks or debentureholders during
the year.
12 The Company has not granted loans and advances on the
basis of security by way of pledge of shares, debentures
and other securities. Natrajan Ramkrishna

13 In our opinion and according to the information and Mumbai Partner

explanations given to us, the Company is not a chit 11 February 2010 Membership No: 032815
fund / nidhi/ mutual benefit fund/ society.

> 47
 Balance Sheet as at 31 December 2009
(Currency: Rs. in thousands except share data)
Note 2009 2008
SOURCES OF FUNDS
Shareholders’ funds
Share capital 3 258,252 256,210
Stock options outstanding 118,828 268
Reserves and surplus 4 31,660,399 24,955,494
32,037,479 25,211,972
Loan funds
Secured loans 5 9,447 17,548
Deferred tax liability 17 51,401 133,746
32,098,327 25,363,266
APPLICATION OF FUNDS
Fixed assets
Gross block 6 10,845,555 9,459,708
Less: Accumulated depreciation 4,773,617 4,192,478
Net block 6,071,938 5,267,230
Capital work-in-progress (Includes capital advances) 1,336,582 2,470,742
7,408,520 7,737,972
Investments 7 22,673,955 16,521,947
Deferred tax asset, net 17 118,363 174,657
Current assets, loans and advances
Sundry debtors 8 3,395,803 5,593,827
Cash and bank balances 9 1,040,456 1,018,721
Unbilled Revenue 354,596 536,455
Loans and advances 10 1,917,602 1,079,769
6,708,457 8,228,772
Less: Current liabilities and provisions
Current liabilities 11 2,763,141 5,216,046
Provisions 12 2,047,827 2,084,036
4,810,968 7,300,082
Net current assets 1,897,489 928,690
32,098,327 25,363,266

The accompanying notes form an integral part of this Balance Sheet.

As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

48 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Profit and Loss Account for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

Note 2009 2008
INCOME
Sales and service income 17,348,606 15,410,234
Other income 13 1,173,415 1,073,422
18,522,021 16,483,656
EXPENDITURE
Personnel costs 14 8,124,686 7,426,623
Selling, general and administration costs 15 3,592,204 3,981,014
Depreciation 6 919,884 878,322
Less: Transfer from revaluation reserve 4 81 81
Interest costs 16 67,453 64,805
12,704,146 12,350,683
Profit for the year before taxation 5,817,875 4,132,973
Provision for taxation 17 810,754 514,458
MAT credit entitlement 17 (434,179) (320,392)
Provision for taxation - Fringe benefits 13,984 47,370
Profit for the year after taxation 5,427,316 3,891,537
Profit and loss account, brought forward 15,459,042 12,406,473
Amount available for appropriation 20,886,358 16,298,010
Adjustment on account of employee benefits – –
Proposed Dividend on equity shares 387,383 384,473
Dividend tax 65,836 65,341
Transfer to general reserve 542,731 389,154
Profit and loss account, carried forward 19,890,408 15,459,042
Earnings per equity share of Rs. 2 each
- Basic 42.32 28.70
- Diluted 41.47 28.65
Weighted average number of equity shares
outstanding during the year
- Basic 128,254,916 135,590,677
- Diluted 130,878,553 135,815,016

The accompanying notes form an integral part of this Profit and Loss Account.
As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

> 49
 Cash Flow Statement for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

2009 2008
Cash flows from operating activities
Profit before taxation 5,817,875 4,132,973
Adjustments:
Depreciation, net of transfer from revaluation reserve 919,805 878,241
Profit on sale of fixed assets, net 11,441 (15,024)
Profit on sale of investments, net (471,493) (396,666)
Loss/(Profit) on revaluation of investments (28) 67
ESOP Compensation Cost 118,560 268
Dividend income (481,407) (484,132)
Interest income (23,266) (17,787)
Interest expense 893 1,379
Provision for doubtful Debts & advances 13,885 14,391
Deferred cancellation gains relating to roll-over cash flow hedges 202,686 –
Unrealised foreign exchange loss/(gain) (327,143) 860,668
Operating cash flows before working capital changes 5,781,808 4,974,378
Decrease/(Increase) in sundry debtors 2,030,487 (740,699)
Decrease/(Increase) in Cost in unbilled revenue 181,860 (227,408)
(Increase)/Decrease in loans and advances (176,506) 233,782
Increase in Advance Billings 32,396 54,699
Increase/(Decrease) in Sundry Creditors-others 74,107 (70,551)
(Decrease)/Increase in Advance from Customers (26,621) 45,204
(Decrease)/Increase in payables to subsidiary companies (913,606) 704,378
Increase in other liabilities 118,807 239,222
(Decrease)/Increase in Provision for retirement benefits (45,606) 64,348
Cash generated from operations 7,057,126 5,277,353
Income taxes paid (including Fringe Benefit Tax) (884,934) (495,179)
Net cash provided by operating activities (A) 6,172,192 4,782,174
Cash flows from investing activities
Purchase of fixed assets (779,267) (1,781,512)
Sale of fixed assets 12,076 166,780
Purchase of non trade investments (52,361,488) (39,864,040)
Purchase of Investments in a Subsidiary (291,273) –
Sale of non trade investments 46,972,275 39,570,426
Dividend received 481,407 484,132
Interest received 14,890 17,353
Net cash used in investing activities (B) (5,951,380) (1,406,861)

50 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Cash Flow Statement (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

2009 2008
Cash flows from financing activities
Issue of equity shares 259,257 5,824
Payments for Buy back of Shares – (2,370,000)
Dividend paid, including dividend tax (449,341) (487,953)
Interest paid (893) (1,379)
Proceeds from finance lease obligations incurred 2,786 6,501
Finance lease obligations repaid (10,886) (12,738)
Net cash used in financing activities (C) (199,077) (2,859,745)
Net increase in cash and cash equivalents during the year (A+B+C) 21,735 515,568
Cash and cash equivalents at the beginning of the year 1,018,721 503,153
Cash and cash equivalents at the end of the year 1,040,456 1,018,721
Notes to the Cash flow statement
Cash and cash equivalents consist of cash on hand and
balances with banks. Cash and cash equivalents included in the cash flow statements
comprise the following balance sheet amounts.
2009 2008
Cash in hand 2,335 51,690
Balance with banks:
- Current accounts 747,141 848,729
- Exchange earners foreign currency account 566,535 291,655
- Effect of changes in Exchange rate (275,555) (173,353)
1,040,456 1,018,721

The accompanying notes form an integral part of this consolidated cash flow statement.
As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

> 51
 Notes to the Financial Statements for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

1 Background 2 Significant accounting policies
Patni Computer Systems Limited ('Patni' or 'the Company') was 2.1 Basis of preparation of financial statements
incorporated on 10 February 1978 under the Companies Act, The accompanying financial statements have been prepared in
1956. On 18 September 2003, the Company converted itself compliance with the requirements of the Companies Act, 1956,
from a private limited company into a public limited company. In guidelines issued by the Securities and Exchange Board of India
February 2004, Patni completed initial public offering of its equity ('SEBI') and Generally Accepted Accounting Principles ('GAAP') in
shares in India comprising fresh issue of 13,415,200 shares and India, under the historical cost convention with the exception of
sale of 5,324,000 equity shares by the existing shareholders. land and buildings of Patni, which have been revalued, on the
In December 2005, Patni issued 5,125,000 American Depository accrual basis of accounting. GAAP comprises mandatory
Shares ('ADSs') at a price of US$ 20.34 per ADS. There was a accounting standards as specified in the Companies
secondary offering of additional 1,750,000 ADSs to the existing (Accounting Standards) Rules, 2006 issued by the Central
shareholders. Patni also issued 1,031,250 ADSs at the price of Government, in consultation with National Advisory Committee
US$ 20.34 per ADS on the exercise of Greenshoe option by the on Accounting Standards ('NACAS') and relevant provisions of
underwriters. Each ADS represented two equity shares of Rs. 2 Companies Act, 1956, to the extent applicable.
each fully paid-up. The preparation of the financial statements in accordance with
Patni owns 100% equity interest in Patni Americas, Inc. GAAP requires that management makes estimates and
(formerly Patni Computer Systems, Inc.), a company assumptions that affect the reported amount of assets and
incorporated in USA, Patni Computer Systems (UK) Limited, a liabilities and disclosure of contingent liabilities as of the date of
company incorporated in UK, Patni Computer Systems GmbH, a financial statements and the reported amounts of revenue and
company incorporated in Germany and Patni Computer Systems expenses during the reporting period. Management believes that
Brasil Ltda., a company incorporated in Brazil. In April 2003, the estimates used in the preparation of financial statements are
Patni Americas, Inc., USA acquired 100% equity interest in The prudent and reasonable. Actual results could differ from these
Reference Inc, a company incorporated in USA. In November estimates. Any revision to accounting estimates is recognised
2004, Patni Americas, Inc. acquired 100% equity in Patni prospectively in the current and future periods.
Telecom Solutions Inc - USA and its subsidiaries. In July 2007, 2.2 Fixed assets and depreciation
Patni Americas, Inc. acquired Patni Life Sciences Inc., (formerly Fixed assets are stated at cost less accumulated depreciation,
known as Taratec Development Corporation), a company except for items of land and buildings which were revalued in
incorporated in New Jersey, U.S.A, for consideration in cash. March 1995. Cost includes inward freight, duties, taxes and
In July 2007, Patni UK acquired business and assets of Logan incidental expenses related to acquisition and installation of the
Orviss International ('LOI'), a European telecommunications asset. Depreciation is provided on the Straight Line Method
consulting services company in a business combination. In ('SLM') based on the estimated useful lives of the assets as
March 2008, Patni UK has set up a subsidiary in Czech Republic determined by the management. For additions and disposals,
named Patni Computer Systems (Czech) s.r.o. In December depreciation is provided pro-rata for the year of use.
2008, the company has set up a subsidiary in Mexico named The rates of depreciation based on the estimated useful lives of
PCS Computer Systems Mexico, SA de CV. Patni also operates fixed assets are higher than those prescribed under Schedule XIV
through foreign branch offices in USA, Japan, Sweden, Korea, to the Companies Act, 1956. The useful lives of fixed assets are
Netherlands, Australia, Finland, Turkey, Ireland, Romania and stated below :-
Switzerland. In June 2009, the company has set up a 100%
Asset Useful life (in years)
subsidiary in Singapore named Patni (Singapore) Pte Ltd.
Leasehold land and Over the lease period
Patni together with its subsidiaries (collectively, "Patni Group" or improvements or the useful life of the
"the Company") is engaged in IT consulting, software assets, which ever is shorter
development and Business Process Outsourcing ("BPO"). The Buildings 40
Company provides multiple service offerings to its clients across Electrical installations 8
various industries comprising financial services, insurance Computers, computer software
services, manufacturing, retail and distribution, communications, and other service equipments 3
media and utilities and technology services (comprising Furniture and fixtures 8
independent software vendors and product engineering). The Office equipments 5
various service offerings comprise application development, Vehicles 4-5
application maintenance and support, packaged software
In case of assets costing upto Rs. 1,000, these are charged to
implementation, infrastructure management services, product
expenses. Assets above Rs. 1,000 and upto Rs. 5,000 are being
engineering services, quality assurance services and BPO services.

52 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

capitalised as part of a larger capital investment programme and The asset “Unbilled revenue”, represents revenues recognised in
depreciated at the rates provided above. excess of amounts billed. These amounts are billed after the
milestones specified in the agreement are achieved and the
2.3 Impairment of Assets
customer acceptance for the same is received. The liability
The Company assesses at each balance sheet date whether there is
"Billings in excess of costs and estimated earnings", represents
any indication that an asset may be impaired. If any such indication
billings in excess of revenues recognised.
exists, the Company estimates the recoverable amount of the asset.
If such recoverable amount of the asset or the recoverable amount Revenue on maintenance contracts is recognised rateably over
of the cash generating unit which the asset belongs to, is less than the term of maintenance. Direct and incremental contract
its carrying amount, the carrying amount is reduced to its origination and set up costs incurred in connection with
recoverable amount. The reduction is treated as an impairment loss support/maintenance service arrangements are charged to
and is recognised in the profit and loss account. If at the balance expense as incurred. These costs are deferred only in situations
sheet date there is an indication that a previously assessed where there is a contractual arrangement establishing a
impairment loss no longer exists, the recoverable amount is customer relationship for a specified year. The costs to be
reassessed and the asset is reflected at the recoverable amount deferred are limited to the extent of future contractual revenues.
subject to a maximum of depreciable historical cost. Further, revenue attributable to set up activities is deferred and
recognised systematically over the years that the related
2.4 Leases revenues are earned, as services performed during set up year
In accordance with Accounting Standard 19 “Accounting for do not result in the culmination of a separate earnings process.
leases”, assets acquired on finance leases, have been recognised
The Company grants volume discounts to certain customers,
as an asset and a liability at the inception of the lease, at an
which are computed based on a pre-determined percentage of
amount equal to the lower of the fair value of the leased asset
the total revenues from those customers during a specified
or the present value of the future minimum lease payments.
period, as per the terms of the contract. These discounts are
Such leased assets are depreciated over the lease term or its
earned only after the customer has provided a specified
estimated useful life, whichever is shorter. Further, the payment
cumulative level of revenues in the specified period. The Company
of minimum lease payments have been apportioned between
reports revenues net of discounts offered to customers.
finance charges, which are debited to the profit and loss
account, and reduction in lease obligations recorded at the The company estimates the total number of customers that will
inception of the lease. ultimately earn these discounts, based on which a portion of the
revenue on the related transactions is allocated to the services
Lease arrangements, where the risks and rewards incidental to
that will be delivered in future.
ownership of an asset substantially vests with the lessor, are
recognised as operating leases. Lease payments under operating Warranty costs on sale of services are accrued based on
lease are recognised as an expense in the profit and loss account. management's estimates and historical data at the time related
revenues are recorded.
2.5 Revenue and cost recognition
Revenues from BPO Services are derived from both time-based
The Company derives its revenues primarily from software
and transaction-priced contracts. Revenue is recognised as the
services and to a lesser extent from BPO services. Revenue from
related services are performed, in accordance with the specific
time-and-material contracts is recognised as related services are
terms of the contracts with the customer.
rendered. Revenue from fixed-price contracts is recognised on a
percentage of completion basis, measured by the percentage of Dividend income is recognised when the Company’s right to
costs incurred to-date to estimated total costs for each contract. receive dividend is established. Interest income is recognised on
This method is used because management considers costs to be the time proportion basis.
the best available measure of progress on these contracts. 2.6 Employee retirement and other benefits
Contract costs include all direct costs such as direct labour and Defined Contribution Plans:
those indirect costs related to contract performance, such as Contributions to defined contribution retirement benefit schemes
depreciation, satellite link costs and foreign travel costs. Selling, are recognised as an expense in the profit and loss account
general, and administrative costs are charged to expense as during the period in which the employee renders the related
incurred. Provision for estimated losses on uncompleted service. e.g. Superannuation scheme and Provident fund.
contracts are made in the year in which such losses are Defined Benefit Plans:
determined. Changes in job performance, job conditions, Gratuity, pension, sick leave and leave encashment schemes are
estimated profitability and final contract settlements may result defined benefits. The present value of the obligation under such
in revision to costs and income and are recognised in the year in defined benefit plans is determined based on actuarial valuation
which the revisions are determined. carried out by an independent actuary at the balance sheet date

> 53
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

using the Projected Unit Credit Method, which recognises each effect upon adoption of AS 30. AS 30 states that particular
period of service as giving rise to additional unit of employee sections of other accounting standards; AS 4, Contingencies
benefit entitlement and measures each unit separately to build and Events Occurring after Balance sheet Date, to the extent it
up the final obligation. deals with contingencies, AS 11 (revised 2003), The Effects of
The obligation is measured at the present value of the estimated Changes in Foreign Exchange Rates, to the extent it deals with
future cash flows. The discount rates used for determining the the ‘forward exchange contracts’ and AS 13, Accounting for
present value of the obligation under defined benefit plans, is Investments, except to the extent it relates to accounting for
based on the market yields on Government securities as at the investment properties, will stand withdrawn only from the date
balance sheet date. Actuarial gains and losses are recognised AS 30 becomes mandatory (1 April 2011 for the Company).
immediately in the Profit and loss account. Accordingly, the Company continues to comply with the
guidance under these accounting standards; AS 4 – relating to
2.7 Foreign currency transactions Contingencies, AS 11 – relating to forward contracts and AS 13
India Operations until AS 30 becomes mandatory. Consequent to the adoption of
Transactions in foreign currency are recorded at the exchange the Standard, the resulting gain of Rs. 19,133 has been adjusted
rate prevailing on the date of the transaction. Foreign currency to the shareholder's fund as on 1 January 2008.
denominated monetary assets and monetary liabilities at the
Effective 1 January 2008, based on the recognition and
year-end are translated at the year-end exchange rate. Exchange
measurement principles set out in the AS 30, changes in the fair
rate differences resulting from foreign exchange transactions
values of derivative financial instruments designated as cash
settled during the year, including year-end translation of
flow hedges were recognised directly in shareholders’ fund and
monetary assets and liabilities are recognised in the profit and
reclassified into the profit and loss account upon the occurrence
loss account.
of the hedged transaction. Changes in fair value relating to the
Foreign branch office operations ineffective portion of the hedges and derivatives not designated
Income and Expenditure other than depreciation costs are as hedges were recognised in the profit and loss account as they
translated into the reporting currency at the prevailing exchange arose.
rates at the date of the transaction. Foreign currency
denominated monetary assets and monetary liabilities at 2.9 Investments
balance sheet date are translated at exchange rates prevailing Long-term investments are stated at cost, and provision for
on the date of the balance sheet. Fixed assets are translated at diminution is made when in the management's opinion there is
exchange rates on the date of the transaction and depreciation a decline, other than temporary, in the carrying value of such
on fixed assets is translated at the exchange rates used for investments. Current investments are carried at lower of cost
translation of the underlying fixed assets. Net exchange and fair value.
difference resulting from translation of items, in the financial 2.10 Taxation
statements of the foreign branches is recognised in the profit Income tax expense comprises of current tax expense & deferred
and loss account. tax expense or credit computed in accordance with the relevant
2.8 Derivative and hedge accounting provisions of the Income Tax Act, 1961. Provision for current
The Company enters into forward foreign exchange taxes is recognised under the taxes payable method based on
contracts/option contracts (derivatives) to mitigate the risk of the estimated tax liability computed after taking credit for
changes in foreign exchange rates on forecasted transactions. allowances and exemptions in accordance with the Indian
The Company enters into derivative financial instruments, where Income-tax Act, 1961. The Fringe Benefit Tax has been
the counterparty is a bank. abolished from 1 April 2009.

In December 2007, the ICAI issued AS 30, Financial Instruments: Deferred tax assets and liabilities are recognised for the future
Recognition and Measurement. Although AS 30 becomes tax consequences attributable to timing differences that result
recommendatory in respect of accounting periods commencing between the profits offered for income taxes and the profits as
on or after April 1, 2009 and mandatory in respect of per the financial statements of the Company. Deferred tax assets
accounting periods commencing on or after 1 April 2011, in and liabilities are measured using the tax rates and the tax laws
March 2008 the ICAI announced that the earlier adoption of AS that have been enacted or substantively enacted by the balance
30 is encouraged. AS 30, along with limited revision to other sheet date. The effect on deferred tax assets and liabilities of a
accounting standards has currently not been notified pursuant change in tax rates is recognised in the period that includes the
to Companies (Accounting Standard) Rules, 2006. enactment rate. Deferred tax assets in respect of carry forward
losses are recognised only to the extent that there is virtual
On 1 January 2008, the Company early adopted AS 30 and the
certainty that sufficient future taxable income will be available
limited revisions to other accounting standards which come into

54 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

against which such deferred tax asset can be realised. Other profit attributable to the equity shareholders for the year by the
deferred tax assets are recognised only if there is a reasonable weighted average number of equity shares outstanding during
certainty that sufficient future taxable income will be available the year. Diluted earnings per share is computed using the
against which such deferred tax assets can be realised. Deferred weighted average number of equity shares and also the
tax assets are reviewed as at each balance sheet date and weighted average number of equity shares that could have been
written down or written-up to reflect the amount that is issued on the conversion of all dilutive potential equity shares.
reasonably / virtually certain (as the case may be) to be realised. The dilutive potential equity shares are adjusted for the proceeds
Minimum Alternate Tax ('MAT') paid in accordance with the tax receivable, had the shares been actually issued at fair value.
laws, which gives rise to future economic benefits in the form of Dilutive potential equity shares are deemed converted as of the
adjustment of future income tax liability, is considered as an beginning of the year, unless they have been issued at a later
asset if there is convincing evidence that the Company will pay date. The number of shares and potentially dilutive equity shares
normal tax after the tax holiday period. Accordingly, it is are adjusted for stock splits and bonus shares, as appropriate.
recognised as an asset in the balance sheet when it is probable 2.12 Provisions and contingent liabilities
that the future economic benefit associated with it will flow to The Company creates a provision when there is present
the Company and the asset can be measured reliably. obligation as a result of a past event that probably requires an
Substantial portion of the profits of the Company are exempted outflow of resources and a reliable estimate can be made of the
from income tax, being profits from undertakings situated at amount of the obligation. A disclosure for a contingent liability
Software Technology Parks. Under the tax holiday, the Company is made when there is a possible obligation or a present
can utilise exemption of profits from income taxes for a period obligation that may, but probably will not, require an outflow
of ten consecutive years. These exemptions expire on various of resources. When there is a possible obligation or a present
dates between years 2005 and 2011. The Company also obligation in respect of which the likelihood of outflow of
benefits from tax holidays for the export of IT services from resources is remote, no provision or disclosure is made.
Special Economic Zone, (SEZ) in India. For units started in an Provisions are reviewed at each balance sheet date and adjusted
SEZ, the profits of the unit are eligible for 100% tax holiday for to reflect the current best estimate. If it is no longer probable
first 5 years, and then 50% tax holiday for the next 10 years on that an outflow of resources would be required to settle the
fulfilment of certain conditions. obligation, the provision is reversed.
In this regard, the Company recognises deferred taxes in respect Contingent assets are not recognised in the financial
of those originating timing differences, which reverse after the statements. However, contingent assets are assessed continually
tax holiday year resulting in tax consequences. Timing differences, and if it is virtually certain that an inflow of economic benefits
which originate and reverse within the tax holiday year do not will arise, the asset and related income are recognised in the
result in tax consequence and therefore no deferred taxes are period in which the change occurs.
recognised in respect of the same. For this purpose, the timing
differences, which originate first are considered to reverse first. 2.13 Employee stock options
The Company determines the compensation cost based on
2.11 Earnings per share intrinsic value method. The compensation cost is amortised on
The basic earnings per share is computed by dividing the net a straight line basis over the vesting period.

3 Share capital
2009 2008
Authorised
250,000,000 (2008: 250,000,000) equity shares of Rs. 2 each 500,000 500,000
Issued, subscribed and paid - up
129,126,032 (2008: 128,105,007) equity shares of Rs. 2 each fully paid 258,252 256,210
258,252 256,210

1) Of the above, 14,500,000 equity shares of Rs. 2 each were 3) The above also includes 46,867,500 equity shares of Rs. 2
allotted as fully paid bonus shares in March 1995 by each allotted as fully paid bonus shares in August 2001 by
capitalisation of general reserve aggregating Rs. 29,000. capitalisation of share premium aggregating Rs. 93,735.
2) In June 2001, Patni's Board of Directors approved a sub 4) In December 2002, in pursuance of section 77A of the
division of existing equity shares of Rs. 10 each into 5 equity Companies Act, 1956, Patni bought back 1,650,679 equity
shares of Rs. 2 each. shares by utilising the share premium account. In this regard,

> 55
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

an amount equivalent to the nominal value of the share approved in accordance with the provisions of Section 77A,
capital bought back by the Company aggregating Rs. 3,301, 77AA, 77B and other applicable provisions of the Companies
has been transferred from general reserve to capital Act, 1956 and the provisions of Securities and Exchange
redemption reserve. Board of India (Buy-back of Securities) Regulations, 1998
5) In August 2003, the Company allotted 37,140,283 equity ('Buy Back Regulations'), for which necessary public
shares of Rs. 2 each as fully paid bonus shares by announcements were made in April 2008.
capitalisation of share premium aggregating Rs. 74,281. During the year ended 31 December 2008, the Company
6) In February 2004, Patni made an initial public offering ('IPO') repurchased a total of 10,957,082 equity shares through the
of its equity shares in India comprising fresh issue of Bombay Stock Exchange and the National Stock Exchange
13,415,200 shares and sale of 5,324,000 equity shares by for an aggregate consideration of Rs. 2,370,000 being 100%
the existing shareholders. In this regard, equity shares of of the amount authorised for buy back. Subsequently, the
Rs. 2 each were issued at a premium of Rs. 228 aggregating Company extinguished such equity shares as per the
Rs. 3,085,496. requirements of the section 77A of the Companies Act,
1956. In this regard an amount equivalent to the nominal
7) In December 2005, Patni issued 6,156,250 American
value of the share capital bought back by the Company
Depository Shares ('ADSs') representing 12,312,500 equity
aggregating Rs. 21,914, has been transferred from general
shares of Rs. 2 each fully paid-up at a price of US$ 20.34 per
reserve to capital redemption reserve which can be utilised
ADS for a gross proceeds of Rs. 5,739,262. Each ADS
only for the purpose of issuing fully paid bonus shares of the
represents two equity shares of Rs. 2 each fully paid-up.
Company. (Refer note 4)
8) In February 2008, the Board of Directors of the Company
9) Amount received from employees on exercise of stock
approved a proposal to repurchase fully paid equity shares
options pending allotment of shares is shown as share
upto 10% of the paid up capital and free reserves, at a
application money. Refer note 24 for employee stock
maximum price of Rs. 325 per equity share, for an aggregate
compensation plans.
amount upto Rs. 2,370,000. The buyback proposal had been

4 Reserves and surplus

2009 2008
Building revaluation reserve
- Balance brought forward 1,272 1,353
- Transfer to profit and loss account (81) (81)
1,191 1,272
Capital redemption reserve
- Balance carried forward 275,215 253,301
- Transfer from general reserve on account of share buy back (Refer note 3) – 21,914
275,215 275,215
Share premium
- Balance brought forward 8,625,435 10,965,988
- Share premium received on issue of equity shares 257,216 7,533
- Share premium utilised for buyback of shares (Refer note 3) – (2,348,086)
8,882,651 8,625,435
Hedging Reserve 26,007 (1,447,666)
General reserve
- Balance brought forward 2,042,196 1,674,956
- Transfer from Profit & Loss account 542,731 389,154
- Transfer to Capital Redemption Reserve on account of share buy back (Refer note 3) – (21,914)
2,584,927 2,042,196
Profit and loss account, balance carried forward 19,890,408 15,459,042
31,660,399 24,955,494

5 Secured loans
2009 2008
Lease obligation in relation to vehicles acquired under finance lease (Refer note 22) 9,447 17,548
Nature of security
Finance lease obligations are secured against the vehicles acquired on lease.

56 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

6 Fixed assets
Land Land Buildings Computer Computers Electrical Office Furniture Vehicles Assets Total as at Total as at
(Freehold) (Leasehold) and software and other installations equipments and held for 31 December 31 December
leasehold service fixtures sale 2009 2008
improvements equipments

Gross block
As at 1 January 2009 171 674,378 2,987,684 1,202,709 2,008,097 816,507 870,994 828,595 70,573 – 9,459,708 8,439,918
Additions – 154,457 881,445 333,797 113,302 70,273 81,885 103,579 9,371 – 1,748,109 1,346,714
Deletions – 43 10,376 96,488 150,712 12,250 46,429 22,869 23,095 – 362,262 326,924
As at 31 December 2009 171 828,792 3,858,753 1,440,018 1,970,687 874,530 906,450 909,305 56,849 – 10,845,555 9,459,708
Accumulated depreciation
As at 1 January 2009 – 25,730 314,074 1,003,398 1,585,970 285,363 485,069 449,395 43,479 – 4,192,478 3,489,324
Charge – (1,020) 111,253 199,886 269,161 100,263 140,671 88,193 11,477 – 919,884 878,322
Deletions – 4 5,895 95,610 148,300 7,835 44,340 16,311 20,450 – 338,745 175,168
As at 31 December 2009 – 24,706 419,432 1,107,674 1,706,831 377,791 581,400 521,277 34,506 – 4,773,617 4,192,478
Net block as at
31 December 2009 171 804,086 3,439,321 332,344 263,856 496,739 325,050 388,028 22,343 – 6,071,938 5,267,230
Net block as at
31 December 2008 171 648,648 2,673,610 199,311 422,127 531,144 385,925 379,200 27,094 – 5,267,230
Note:
1. Gross block of vehicles as of 31 December 2009 includes assets acquired on lease, refer note 22.

7 Investments
2009 2008
Long term (Unquoted, at cost)
Trade
Investment in Subsidiary companies
9,350 (2008: 9,350) equity shares fully paid of Patni Americas, Inc. (no par value) 4,605,465 4,605,465
6,153,350 (2008: 6,153,350) equity shares of 1 pound each fully paid of
Patni Computer Systems (UK) Limited 492,369 492,369
Contribution of Euro 2,150,000 (2008: Euro 150,000) towards Capital of
Patni Computer Systems – Gmbh 137,302 6,076
Contribution of Pesos 31,146,176 (2008: Nil) towards PCS Computer Systems Mexico SA de CV 93,360 –
2,000,000 (2008: Nil) equity shares of 1 SGD each fully paid up of Patni (Singapore) Pte Limited 66,687 –
5,395,183 5,103,910
Others
Investment
NABARD Term Deposit 10% 138,006 –
12.75 Percent Prakausali Investments NCD 250,000 –
Nil units (2008: 13,500) in NABARD Bonds – 135,000
388,006 135,000
Non-trade
Investment in Mutual Funds
20,000,000 units (2008: Nil) of Kotak Fixed Maturity Plan 13 Months Series 5 - Growth 200,000
15,000,000 units (2008: Nil) of IDFC-Fixed Maturity Plan-Thirteen Months Series 1 - Plan B Growth 150,000
7,144,745 units (2008: 7,144,745) of HDFC Cash Management Fund - Saving Plan - Growth 100,000 100,000
3,718,503 units (2008: 3,718,503) of Birla Sun Life Cash Plus-Institutional Premium Plan (Growth) 39,624 39,624
Nil units (2008: 35,000,000) of Kotak Fixed Maturity Plan 15 Months Ser 4 Institutional Growth – 350,000
Nil units (2008: 25,000,000) of DSPML Fixed Maturity Plan 12
1/2 Months Series 1 Institutional Growth – 250,000
Nil units (2008: 24,550,000) of IDFC Fixed Maturity Plan Yearly Series 20 - Plan B - Growth – 245,500

> 57
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
Nil units (2008: 20,000,000) of DWS Fixed Term Fund -Series 47 - Institutional Growth – 200,000
Nil units (2008: 20,000,000) of DSP BlackRock Fixed Maturity Plan - 13 Months -
Series 1 - Institutional Plan - Growth – 200,000
Nil units (2008: 20,000,000) of Reliance Fixed Horizon Fund VII - Series 4 - Institutional growth – 200,000
Nil units (2008: 15,000,000) of Lotus India Fixed Maturity Plan-15 Months Series II Institutional Growth – 150,000
Nil units (2008: 14,190,973) of - OISID HSBC Cash Fund - Institutional Plus - Growth – 150,000
Nil units (2008: 13,000,000) of Templeton Fixed Horizon Fund Series 7-Plan D-Institutional-Growth – 130,000
Nil units (2008: 10,002,193) of Birla Fixed Term Plan - Institutional - Series AK - Growth – 100,022
Nil units (2008: 10,000,000) of ABN Amro Fixed Term Plan Series 10
Plan E Institutional Growth 29719/83 – 100,000
Nil units (2008: 10,000,000) of Birla Fixed Term Plan- Institutional - Series AM- Growth – 100,000
Nil units (2008: 10,000,000) of DSP BlackRock Fixed Maturity Plan - 15 Months -
Series 2 - Institutional Plan - Growth – 100,000
Nil units (2008: 10,000,000) of DWS Fixed Term Fund -Series 46 - Institutional Growth – 100,000
Nil units (2008: 10,000,000) of Standard Chartered Fixed Maturity Plan yearly Series 17 plan B Growth – 100,000
Nil units (2008: 10,000,000) of JM Fixed Maturity Plan Series VII-15 Months-
Plan 1 Growth plan (286) 7021966294 – 100,000
Nil units (2008: 10,000,000) of JM Fixed Maturity Fund Series XI-13 Months
Plan 1 Institutional Growth Plan 320 – 100,000
Nil units (2008: 10,000,000) of Kotak Fixed Maturity Plan 14M Series 4 Institutional-Growth Option – 100,000
Nil units (2008: 10,000,000) of ICICI Prudential Fixed Maturity Plan Series 43-13 Months
Plan D Institutional Growth – 100,000
Nil units (2008: 10,000,000) of Templeton Fixed Horizon Fund Series 7-Plan C-Institutional-Growth – 100,000
Nil units (2008: 10,000,000) of Birla Fixed Term Plan - Institutional - Series AE - Growth – 100,000
Nil units (2008: 9,000,000) of Standard Chartered Fixed Maturity Plan yearly Series 19 plan B Growth – 90,000
Nil units (2008: 8,400,000) of Kotak Fixed Maturity Plan 13 Months Series 3 Institutional-Growth Option – 84,000
Nil units (2008: 8,000,000) of Reliance Fixed Horizon Fund VII - Series 1 - Institutional growth – 80,000
Nil units (2008: 7,000,000) of Lotus India Fixed Maturity Plan-375 Days Series VII-Institutional Growth – 70,000
Nil units (2008: 7,000,000) of ICICI Prudential Fixed Maturity Plan Series 41 -
Fourteen Months Plan Institutional Cumulative – 70,000
Nil units (2008: 6,000,000) of Lotus India Fixed Maturity Plan-4 Months Series III-Institutional Growth – 60,000
Nil units (2008: 5,000,000) of Kotak Fixed Maturity Plan 14 Months Series 3 Institutional-Growth Option – 50,000
Nil units (2008: 5,000,000) of Lotus India Fixed Maturity Plan-13 Months Series IV-Institutional Growth – 50,000
Nil units (2008: 5,000,000) of ICICI Prudential Fixed Maturity Plan Series 43 -
Thirteen Months Plan B Institutional Growth – 50,000
Nil units (2008: 5,000,000) of Tata Fixed Investment Plan - 1 Scheme A-Institutional Plan-Growth – 50,000
Total 489,624 3,869,146
Current (Unquoted, at lower of cost or fair value)
Non-trade
Investment in Mutual Funds
278,953,675 units (2008: Nil) of IDFC Money Manager Fund - Treasury Plan -
Super Institutional Plan C - Regular Dividend 2,789,823 –
180,835,202 units (2008: Nil) of DWS Ultra Short Term Fund - Institutional Dividend 1,809,529 –
124,066,657 units (2008: Nil) of HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 1,243,102 –
119,362,231 units (2008: Nil) of Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 1,194,029 –
8,612,915 units (2008: Nil) of ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 908,070 –
89,455,239 units (2008: Nil) of Kotak Floater Long-Term-Weekly Dividend 901,544 –
65,235,287 units (2008: Nil) of Religare Ultra Short Term Fund - Institutional - Daily Dividend 653,377 –

58 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
33,108,810 units (2008: Nil) of Kotak Floater Long-Term-Weekly Dividend 333,705 –
2,987,967 units (2008: Nil) of ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 315,024 –
2,103,537 units (2008: Nil) of ICICI Prudential Floating Rate Plan D - Daily Dividend 210,447 –
18,914,676 units (2008: Nil) of DWS Ultra Short Term Fund - Regular Monthly Dividend Plan 200,000 –
17,193,229 units (2008: Nil) of HSBC Floating Rate - Long Term Plan -
Institutional Option - Weekly Dividend 193,141 –
17,215,204 units (2008: Nil) of IDFC Money Manager Fund - Treasury Plan -
Super Institutional Plan C - Regular Dividend 172,152 –
15,016,114 units (2008: Nil) of HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 150,417 –
7,747,789 units (2008: Nil) of Templeton India ultra short bond fund super Institutional plan
Daily Dividend Reinvestment 77,568 –
571,327 units (2008: Nil) of ICICI Prudential Institutional Liquid Plan-Super Institutional Daily Dividend 57,147 –
96,327,280 units (2008: 53,583,436) of Reliance Medium Term Fund - Weekly Dividend Plan 1,647,057 916,151
146,135,601 units (2008: 43,168,290) of Tata Floater Fund-Weekly Dividend 1,473,504 435,309
61,309,771 units (2008: 8,779,708) of Birla Sun Life Short Term Fund-Institutional Daily Dividend 613,435 87,845
60,564,419 units (2008: 479,266) of ABN Amro Money Plus Institutional weekly Dividend 605,783 4,793
20,747,240 units (2008: 15,797,760) of Tata Floater Fund-Weekly Dividend 209,160 159,266
101,754 units (2008: 679,425) of TATA Liquid Super High Investment Fund - Daily Dividend 113,407 757,232
4,745,712 units (2008: 30,537,286) of JM Money Manager Fund-Super Plus Plan-Weekly Dividend 48,644 310,675
1,632,230 units (2008: 5,261,129) of Birla Sun Life Liquid Plus - Institutional - Weekly Dividend 16,338 52,665
Nil units (2008: 67,954,590) of Birla Sun Life Cash Plus - Institutional Prem -
Daily Dividend -Reinvestment – 680,871
Nil units (2008: 63,009,161) of ICICI Prudential Institutional Liquid Plan Super Institutional
Daily Dividend Reinvest Dividend – 630,123
Nil units (2008: 41,693,161) of Reliance Liquidity Fund -Daily Dividend Reinvestment Option – 417,061
Nil units (2008: 35,477,058) of Prudential Flexible Income Plan Dividend-Weekly – 374,113
Nil units (2008: 32,330,373) of Prudential Flexible Income Plan Dividend-Weekly – 341,122
Nil units (2008: 30,393,581) of Birla Sun Life Liquid Plus - Institutional - Weekly Dividend – 304,394
Nil units (2008: 29,977,116) of Prudential ICICI Floating Rate Fund Plan D-Dividend Daily – 299,834
Nil units (2008: 18,903,846) of GCDB IDFC Cash Fund - Institutional Plan B - Daily Dividend – 200,033
Nil units (2008: 16,948,854) of ABN Amro Money Plus Institutional -Weekly Dividend – 169,497
Nil units (2008: 16,020,865) of Kotak Quarterly Interval Plan Series 6 Dividend – 160,211
Nil units (2008: 15,263,928) of JM Money Manager Fund -Super Plus Plan-Weekly Dividend – 155,569
Nil units (2008: 14,202,082) of Kotak Flexi Debt Scheme Institutional - Weekly Dividend – 142,571
Nil units (2008: 12,500,000) of P1363 ICICI Prudential Interval Fund IV
Quarterly Interval Plan C Institutional Dividend – 125,000
Nil units (2008: 10,724,975) of Kotak Quarterly Interval Plan Series 3 Dividend – 107,338
Nil units (2008: 10,349,812) of GFBW IDFC Liquid Plus Fund - Treasury Plan -
Institutional Plan B Weekly Dividend – 104,499
Nil units (2008: 10,090,682) of Kotak Quarterly Interval Plan Series 6 Dividend – 100,907
Nil units (2008: 9,852,753) of Kotak Quarterly Interval Plan Series 3 Dividend – 98,542
Nil units (2008: 5,441,733) of Templeton India ultra short bond fund
super institutional plan Daily Dividend – 54,519
Nil units (2008: 5,101,957) of GFBW IDFC Liquid Plus Fund - Treasury Plan -
Institutional Plan B Weekly Dividend – 51,513
Nil units (2008: 5,034,502) of DWS liquid plus fund - institutional weekly dividend – 50,751
Nil units (2008: 2,219,580) of DWS liquid plus fund - institutional weekly dividend – 22,295
Nil units (2008: 4,176) of DSPML Liquid Plus-Institutional Premium -Weekly Dividend – 4,180
Total 15,936,403 7,318,879

> 59
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
Others
Investment in others
5000 units (2008: 1000) of Canara Bank Certificates of Deposit 465,181 95,482
Total 465,181 95,482
Total 22,674,397 16,522,417
Less: Provision for decline in the fair value of investments (442) (470)
Total 22,673,955 16,521,947
Aggregate value of unquoted investments 22,673,955 16,521,947
Refer note 26 for summary of investments purchased and sold during the year.

8 Sundry debtors (Unsecured)

2009 2008
Debts outstanding for a period exceeding six months
- considered good 25,271 667,375
- considered doubtful 5,941 29,297
31,212 696,672
Other debts
- considered good 3,370,532 4,926,452
- considered doubtful 7,367 –
3,409,111 5,623,124
Less: Provision for doubtful debts 13,308 29,297
3,395,803 5,593,827

Of the above, debts due from companies under the same management as defined under Section 370(1)(B) of the Companies Act, 1956
aggregate Rs. 1,617,440 (2008: Rs. 3,899,060). This consists of debts due from Patni Americas, Inc. aggregating Rs. 1,186,337 ( 2008: Rs.
3,286,057); Patni Computer Systems (UK) Limited aggregating Rs. 315,002 (2008: Rs. 298,910), Patni Computer Systems Gmbh aggregating
Rs. 26,944 (2008: Rs. 103,694), Patni Telecom Solutions Pvt Ltd. Rs. 10,099 (2008: Rs. 176,895) and Patni Life Science, Inc. Rs
. 74,727 (2008:
Rs. 25,078), Patni Telecom Solutions Inc Rs. 614 (2008: Rs. Nil), Patni Telecom Solutions (UK) Limited Rs. 3,717 (2008: Nil)

9 Cash and bank balances

2009 2008
Cash on hand 2,335 51,690
Balances with scheduled banks
- in current accounts 391,578 261,270
- in term deposit account 475 50,000
Balances with Non-scheduled banks
- in current accounts (Refer Note 27) 646,068 655,761
1,040,456 1,018,721

60 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

10 Loans and advances (Unsecured)
2009 2008

Advances recoverable in cash or in kind or for value to be received 164,176 200,191

Security deposits with companies under the same management :
Ashoka Computer Systems Private Limited 591 591
(Maximum amount of outstanding during the year; Rs. 591, 2008: Rs. 591)
PCS Cullinet Private Limited 627 627
(Maximum amount of outstanding during the year; Rs. 627 , 2008: Rs. 627)
PCS Finance Private Limited 501 501
(Maximum amount of outstanding during the year; Rs. 501, 2008: Rs. 501)
Ravi and Ashok Enterprises 30 30
(Maximum amount of outstanding during the year; Rs. 30, 2008: Rs. 30)
1,749 1,749
MAT Credit entitlement [Refer note 17(b)] 1,025,567 591,388
Interest accrued on Investments 10,657 2,281
Other deposits 220,263 246,542
Deposit with tax authorities 236,986 –
Loan to employees 8,549 3,019
Advance payments of income-tax 157,182 37,352
Derivative Assets 98,933 –
1,924,062 1,082,522
Less: Provision for doubtful loans and advances 6,460 2,753
1,917,602 1,079,769

11 Current liabilities
2009 2008

Sundry creditors 155,041 267,387

Payable to subsidiary companies 201,069 1,114,675
Billings in excess of cost and estimated earnings 152,861 120,466
Advance from customers 13,247 40,191
Unclaimed dividend * 770 475
Derivative Liability 343,374 1,873,475
Other liabilities 1,896,779 1,799,377
2,763,141 5,216,046
* There is no amount due and outstanding to be credited to Investor Education and Protection Fund.

12 Provisions

2009 2008
Provision for taxation (net of advance tax: Rs. 2,424,996; 2008: Rs. 1,582,063) 1,175,392 1,169,579
Provision for retirement benefits 419,222 464,828
Dividend on equity shares 387,378 384,315
Dividend tax 65,835 65,314
2,047,827 2,084,036

> 61
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

13 Other income
2009 2008

Dividend on non-trade investments 481,407 484,132

Profit on sale of non-trade investments, net 471,493 396,666
Interest from:
- Loan to employees 226 806
- Bank deposits (tax deducted at source Rs. 1494; 2008: Rs. 98) 14,868 1,736
- Others (Refer note 30) 66,993 145,355
Miscellaneous income 138,428 44,727
1,173,415 1,073,422

14 Personnel costs
2009 2008

Salaries, bonus and allowances, including overseas employee expenses 7,662,769 6,833,783
Contribution to provident and other funds 228,043 228,050
Staff welfare 197,469 222,489
Pension, gratuity and leave encashment costs 36,405 142,301
8,124,686 7,426,623

15 Selling, general and administration costs

2009 2008

Travel and conveyance 671,121 712,712

Outsourced service charges 538,624 459,709
Legal and professional fees 164,127 150,515
Rent 396,497 415,252
Communication 188,904 184,645
Electricity 306,456 295,047
Advertisement and publicity 53,198 63,297
Software consumables 15,599 22,257
Rates and taxes 61,599 53,103
Recruitment charges 46,846 84,827
Insurance 47,694 46,166
Training fees 33,919 43,368
Printing and stationery 20,283 36,859
Subscription, registration and license fee 13,561 14,284
Repairs and maintenance
- computers 128,739 121,177
- building 33,244 61,524
- others 8,408 14,819
Provision for doubtful debts and advances 13,885 14,391
Foreign exchange (gain)/loss, net 469,356 879,454
Gain/Loss on sale of fixed assets 11,441 (15,024)
Miscellaneous expenses 368,703 322,632
3,592,204 3,981,014

16 Interest costs
2009 2008

Interest on finance lease obligations 866 1,147

Interest on bank overdrafts 26 232
Interest on tax assessments (Refer note 30) 66,277 58,745
Interest on others 284 4,681
67,453 64,805

62 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

17 Taxes
2009 2008

a) Provision for tax expense consists of the following:

Current taxes
- Indian (Refer Note c) 677,047 426,024
- Foreign 162,668 33,613
839,715 459,637
Deferred tax expense / (credit)
- Indian 56,133 (58,408)
- Foreign (85,094) 113,229
(28,961) 54,821
810,754 514,458
The significant components of deferred tax asset and liability consists of the following:
Provision for retirement benefits 91,985 117,329
Provision for bad and doubtful debts 523 1,294
Carry forward capital loss – 13,563
Carry forward loss 4,368 –
Unrealised loss on derivative contracts 103,016 107,544
Depreciation (82,708) (65,546)
Others 1,179 473
Total deferred tax asset, net 118,363 174,657
US branch profit taxes (84,181) (171,479)
Others 32,780 37,733
Total deferred tax liability (51,401) (133,746)

b) Provision for Income Tax has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Sec 115JB of the Inco me
Tax Act, 1961. Considering the future profitability and taxable positions in the subsequent years, the company has recognised "MAT credit
entitlement" of Rs. 434,179 (2008: Rs. 320,392) as an asset by crediting to the Profit & loss account an equivalent amount and included
under "Loans and Advances" (Note 10) in accordance with the guidance note on "Accounting for credit available in respect of Min imum
Alternate Tax under Income Tax Act, 1961" issued by the Institute of Chartered Accountants of India.
c) During the year the company received a favorable order from the Income Tax Appellate Tribunal allowing the set off of losses of 10A units
against Business Income. Based on the same the Company has reversed the relevant tax provisions amounting to Rs. 114,393 relati ng to
the above issue for all years upto AY 2006-07.

18 Auditors remuneration
2009 2008
Remuneration to auditors consists of the following:
Audit fees 10,608 10,692
Taxation 2,330 3,350
Other services 232 230
Reimbursement of expenses 184 305
13,354 14,577

19 Segmental information
In accordance with paragraph 4 of Accounting standard 17 "Segment Reporting" issued by the ICAI, the Company has presented segm ental
information only on the basis of the consolidated financial statements (refer note 20 of the consolidated financial statements)

> 63
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Related party transactions
(a) Names of related parties and nature of relationship where control exists
Sr. No. Category of related parties Names
1 Subsidiaries 1) Patni Americas, Inc., USA
2) Patni Computer Systems (UK) Limited
3) Patni Computer Systems GmbH
4) Patni Telecom Solutions Inc., USA
5) Patni Telecom Solutions (UK) Limited
6) Patni Telecom Solutions Private Limited
7) Patni Life Sciences Inc., USA
8) Patni Computer Systems Brasil Ltda.
9) Patni Computer Systems (Czech) s.r.o
10) PCS Computer Systems, Mexico, SA de CV
11) Patni (Singapore) Pte Ltd
2 Affiliates 1) PCS Technology Limited and its subsidiaries
2) Ashoka Computer Systems Private Limited
3) PCS Cullinet Private Limited
4) PCS Finance Private Limited
5) Ravi & Ashok Enterprises
6) iSolutions Inc.
3 Key management personnel 1) Mr Narendra K Patni
2) Mr Ashok K Patni
3) Mr Gajendra K Patni
4) Mr William Grabe
5) Mr Arun Duggal
6) Mr Michael Cusumano
7) Mr Arun Maira 1
8) Mr Pradip Shah
9) Mr Ramesh Venkateswaran
10) Mr Louis Theodoor van den Boog 2
11) Mr Abhay Havaldar
12) Mr Jeya Kumar 3
13) Mr Pradeep Baijal 4
4 Parties with substantial interest 1) Members of Patni family and their relatives
2) General Atlantic Mauritius Limited ('GA')
5 Others 1) Ravindra Patni Family Trust

1 Ceased to be director with effect from 22 July 2009

2 Ceased to be Executive director with effect from 20 February 2009 and now Non executive director.
3 Appointed as Chief Executive Officer with effect from 20 February 2009 and as Executive Director from 25 June 2009
4 Appointed as Director with effect from 25 June 2009

64 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Related party transactions (Contd.)
(b) Transactions and balances with related parties
Nature of the transaction Subsidiaries Affiliates Key Parties with
management substantial
personnel interest
Transactions during the year ended 31 December 2009
Investments 291,273 – – –
Remuneration – – 128,645 –
No of ESOP's granted – – 1,500,000 –
No of RSUs granted – – 350,000 –
Commission expense – – 29,345 –
Sitting fees paid – – 1,420 –
Sales and service income 6,151,774 – – 20,173
Purchase of fixed assets 65 – – –
Professional fees expense 9,664 – – –
Amount incurred on behalf of subsidiaries 199,041 – – –
Rent and other expenses 19,266 3,629 – –
Dividend Paid – 54,766 42,366 157,533
Amounts incurred by subsidiary on behalf of the Company 2,022,010 – – –
Deposit paid 261 – – –
Balances at 31 December 2009
Investments 5,395,183 – – –
Security deposits paid – 1,748 – –
Debtors 1,617,440 – – 3,156
Deposits 5,240 – – –
Amounts payable 201,069 2,262 – –
Remuneration payable to the directors – – 53,584 –
Commission Payable – – 4,177 –
Provision for pension benefits – – 125,133 –
Proposed dividend – 54,766 40,266 153,984
Stock Option Outstanding – – 28,079 –
Transactions during the year ended 31 December 2008
Remuneration – – 41,743 –
No of RSUs granted – – 96,000 –
Commission expense – – 33,966 –
Sitting fees paid – – 940 –
Sales and service income 6,191,254 – – 19,822
Professional fees expense 8,941 – – –
Reimbursement of expenses by subsidiaries 258,006 – – –
Rent and other expenses – 3,560 – –
Deposit received back – – – 3,000
Dividend Paid – 54,766 44,863 152,031
Amounts incurred by subsidiary on behalf of the Company 1,471,537 – – –
Amounts repaid to subsidiary 5,264 – – –
Balances at 31 December 2008
Investments 5,103,910 – – –
Security deposits paid – 1,748 – –
Deposits 5,240 – – –
Debtors 3,899,060 – – 5,028
Amounts payable 1,115,055 1,214 – 244
Proposed dividend – 54,766 44,863 152,031
Remuneration payable to the directors – – 1,953 –
Commission Payable – – 25,866 –
Stock Option Outstanding 268
Provision for pension benefits – – 134,821 –
Capital Commitment to subsidiary company during the year ended 31 December 2009, not included above Rs. 1298; (2008: Rs. 538).
Refer note 28 for Managerial remuneration

> 65
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Related party transactions (Contd.)
Out of the above, transactions with related parties in excess of 10% of the total related party transactions are as under:
Particulars 2009 2008
Transactions during the year
i) Remuneration
Mr Jeya Kumar 121,915 –
Mr Louis Theodoor van den Boog – 41,743
ii) No of ESOP's granted
Mr Jeya Kumar 1,500,000 –
No of RSU's granted
Mr Jeya Kumar 350,000 –
Mr Louis Theodoor van den Boog – 96,000
iii) Commission expense
Mr A K Patni 8,400 11,200
Mr G K Patni 8,325 11,100
iv) Sitting Fees paid
Mr Arun Duggal 200 120
Mr Michael Cusumano 220 120
Mr Arun Maira – 120
Mr Pradip Shah 220 160
Mr Ramesh Venkateswaran 300 200
v) Sales and service income
Subsidiaries
Patni Americas, Inc., USA 5,364,572 5,571,477
Parties with substantial interest
General Atlantic Mauritius Limited ('GA') 20,173 19,822
vi) Dividend paid
Affiliates
iSolutions Inc. 54,766 54,766
Parties with substantial interest
General Atlantic Mauritius Limited ('GA') 68,742 68,742
Arihant G Patni 15,846 15,846
Vasundhara A Patni 15,000 –
Key Management Personnel
Mr A K Patni 23,771 27,270
Mr G K Patni 12,268 11,267
Mr N K Patni 6,326 6,326
vii) Professional fees expense
Patni Americas,Inc., USA 9,664 8,941
viii) Reimbursement of expenses by subsidiaries
Patni Americas, Inc., USA 72,805 84,990
Patni Telecom Solutions Private Limited 89,961 139,492
Patni Computer Systems (UK) Limited 29,557 30,896
ix) Rent and other expenses
Subsidiaries
Patni Telecom Solutions Private Limited 19,266 –
Affiliates
Ashoka Computer Systems Private Limited 1,134 1,022
PCS Cullinet Private Limited 1,403 1,529
PCS Finance Private Limited 972 890
x) Repayment to subsidiaries
Patni Telecom Solutions Private Limited – 5,264
xi) Amounts incurred by subsidiary on behalf of the Company
Patni Americas, Inc., USA 1,623,996 1,217,263
xii) Deposit Paid
Patni Computer Systems (UK) Limited 261 –

66 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Related party transactions (Contd.)
Out of the above, transactions with related parties in excess of 10% of the total related party transactions are as under:
Particulars 2009 2008
Transactions during the year
xiii) Investments
Investment - Capital of Patni Computer Systems – Gmbh 131,226 –
Investments - Patni (Singapore) Pte Limited 66,687 –
Investments - PCS Computer Systems Mexico SA de CV 93,360 –
xiv) Deposit received back
Parties with substantial interest :
Mr S M Patni – 3,000
Balances as at the year end
i) Investments
Patni Americas, Inc.,USA 4,605,465 4,605,465
ii) Security deposits paid
Affiliates :
Ashoka Computer Systems Private Limited 591 591
PCS Cullinet Private Limited 627 627
PCS Finance Private Limited 501 501
iii) Deposits received
Patni Telecom Solutions Private Limited 5,240 5,240
iv) Debtors
Subsidiaries :
Patni Americas,Inc., USA 1,186,336 3,286,057
Patni Computer Systems (UK) Limited 315,002 –
Parties with substantial interest :
General Atlantic Mauritius Limited ('GA') 3,156 5,028
v) Amounts payable
Subsidiaries :
Patni Americas, Inc., USA 158,056 957,924
Affiliates :
PCS Cullinet Private Limited 951 589
Ashoka Computer Systems Private Limited 657 301
PCS Finance Private Limited 563 263
vi) Proposed dividend
Affiliates :
iSolutions Inc. 54,766 54,766
Key Management Personnel
Mr Ashok K Patni 21,671 27,270
Mr G K Patni 12,268 11,267
Mr N K Patni 6,326 6,326
Parties with substantial interest :
General Atlantic Mauritius Limited ('GA') 68,742 68,742
Arihant G Patni 14,671 15,845
Vasundhara A Patni 15,000 –
vii) Remuneration payable to the directors
Mr Jeya Kumar 53,584 –
Mr Louis Theodoor van den Boog – 1,953
viii) Commission payable to the directors
Mr Ashok K Patni – 11,200
Mr Gajendra K Patni – 11,100
Mr Arun Duggal 933 948
Mr Michael Cusumano 466 443
Mr Pradip Shah 700 695
Mr Ramesh Venkateswaran 933 987
Mr Loek Van Den Boog 466 –
Mr Pradeep Baijal 566 –

> 67
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Related party transactions (Contd.)
Out of the above, transactions with related parties in excess of 10% of the total related party transactions are as under:
Particulars 2009 2008
Balances as at the year end
ix) Stock Option Outstanding
Mr Jeya Kumar 22,289 –
Mr Louis Theodoor van den Boog 5,791 268
x) Provision for pension benefits
Mr Ashok K Patni 68,679 70,466
Mr Gajendra K Patni 56,455 64,354

21 Reconciliation of basic and diluted shares used in computing earnings per share
2009 2008
Number of shares considered as basic weighted average shares outstanding 128,254,916 135,590,677
Add: Effect of dilutive issues of stock options 2,623,637 224,339
Number of shares considered as weighted average shares and potential shares outstanding 130,878,553 135,815,016

22 Leases
The Company has acquired certain vehicles under finance lease for a non-cancelable period of 4 years. At the inception of the lease, fair value
of such vehicles has been recorded as an asset under gross block of vehicles with a corresponding lease obligation recorded und er secured
loans. Fixed assets include the following amounts in relation to the above leased assets:
As at 2009 2008
Gross block of vehicles 27,492 43,692
Less: Accumulated depreciation 17,936 26,295
Net block 9,556 17,397

Future minimum lease payments in respect of the above assets as at 31 December 2009 are summarised below:
Minimum lease Finance charge Present value of
payments minimum lease payments
Amount due within one year from the balance sheet date 5,779 550 5,229
Amount due in the period between one year and five years 4,508 289 4,218
10,287 839 9,447
The Company has operating lease agreements, primarily for leasing office space and residential premises for its employees. Most of the lease
agreements provide for cancellation by either party with a notice period ranging from 30 days to 120 days and also contain a clause for renewal
of the lease agreement at the option of the Company. Additionally, the Company has taken certain office premises under non-canc elable
operating lease arrangements, which are renewable at the option of the Company.
The future minimum lease payments in respect of such non-cancelable operating leases as at 31 December 2009 are summarised belo w:

As at 2009 2008
Amount due within one year from the balance sheet date 141,228 308,086
Amount due in the period between one year and five years 263,433 333,743
Amount due beyond five years – 20,480
404,661 662,309
Rent expense for all operating leases for the year ended 31 December 2009 aggregated Rs. 379,330 (2008: Rs. 399,762)

23 Contingent liabilities and capital commitments

2009 2008
Estimated amount of contracts remaining to be executed on capital account and not provided for 2,585,843 2,442,808
Foreign currency forward contracts 14,883,003 14,164,407
Foreign currency option contracts 465,200 5,579,879
Bank guarantees 76,994 55,838
Tax contingency 2,482,297 2,482,297

68 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

Estimated amount of contracts remaining to be executed on capital account and not provided for includes cases wherein purchase orders
have been released and work has either not commenced or has been partially completed.
Foreign currency forward contracts and forward currency options represents the total notional value of such contracts outstandi ng as at the
balance sheet date.
In December 2008 the Company received a Demand of approximately Rs. 458,665 for the Assessment Year 2003-04 including an intere st
demand of Rs. 258,644 and another Demand in January 2009 of approximately Rs. 1,131,763 for the Assessment Year 2005-06 includi ng
an interest demand of approximately Rs. 421,972. These new demands concern the same issue of disallowance of tax benefits under Section
10A of the Indian Income Tax Act, 1961 as per the earlier assessments. The Company has filed an appeal with the tax authorities and stay of
demand has been granted till 28 February 2010 or settlement of appeal whichever is earlier. As per stay of demand order, till December 2009
the Company has paid sum of Rs. 66,000 for the Assessment Year 2003-04 and Rs. 170,986 for the Assessment year 2005-06 as such the
matter is under appeal. Management considers these demands as not tenable against the Company and, therefore, no provision for this tax
contingency has been established.
The Tax department had earlier rejected our claim under section 10A and raised a demand of Rs. 630,166 for AY 2004-05 and Rs. 2 61,703
for AY 2002-03 in December 2006 and December 2007 respectively. However on appeal in 2008, the CIT (Appeal) had allowed the cla im
under section 10A of the Income Tax Act, 1961. The Indian Income tax department has appealed against the CIT (Appeals') orders in respect
of assessment year 2002-03 and 2004-05 in the tribunal. Management considers these demands as not tenable against the Company a nd,
therefore, no provision for this tax contingency has been established.
In December 2009 the Income tax department has issued draft assessment order for A.Y.2006-07 disallowing 10A deduction of the I ndian
Income Tax Act, 1961 as per the earlier assessments, as well as making a Transfer Pricing Adjustment for BPO operations of the Company.
The Company has filed the objections against the draft order before the Dispute Resolution Panel (DRP) newly set up under the I ncome Tax
Act, 1961. Management considers these disallowances as not tenable against the Company and in absence of any demand raised at t his
juncture, no provision is required.
Certain other income tax related legal proceedings are pending against the Company. Potential liabilities, if any, have been ad equately
provided for, and the Company does not currently estimate any incremental liability in respect of these proceedings. Additional ly, the
Company is also involved in lawsuits and claims which arise in ordinary course of business. There are no such matters pending t hat Patni
expects to be material in relation to its business.

24 Employee stock compensation plans

On 30 June 2003, Patni established the 'Patni ESOP 2003' plan ('the plan'). Under the plan, the Company is authorised to issue up to
11,142,085 equity shares to eligible employees. Employees covered by the Plan are granted an option, which may be based on serv ice and
performance criteria, to purchase shares of the Company subject to the requirements of vesting. The options vest in a graded ma nner over
four years with 25 per cent of the options vesting at the end of each year and expire at the end of 5 years from the date of ve sting. A
compensation committee constituted by the Board of directors of the Company administers the plan. The plan has been amended to enable
the Company to issue upto 2,000,000 ADR linked options (wherein one ADR linked option is equal to two equity shares) to the emp loyees
of the Company as well as its subsidiaries and hence "Patni ESOP 2003 - Revised 2006" has come into force with effect from 21 J une 2006.
In June 2009 at the Annual General Meeting the shareholders authorised the Company to issue additional 8,000,000 equity shares to eligible
employees under the "Patni ESOP 2003 - Revised 2008" plan.
The exercise price of the grant approximated the fair value of the underlying equity shares at the date of the grant, except in the case of
restricted stock units, where in the exercise price for the grants offered to employees is at face value of the share price.
Stock options* activity under the plan is as follows:

Year ended 31 December 2009

Shares arising Range of Weighted average remaining
out of options exercise prices contractual life (months)
Outstanding at the beginning of the year 525,525 145 35
2,824,076 254-338 52
2,005,226 339-493 50
350,000 112 89
596,000 2 89

> 69
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

24 Employee stock compensation plans (Contd.)
Stock options* activity under the plan is as follows:
Year ended 31 December 2009
Shares arising Range of Weighted average remaining
out of options exercise prices contractual life (months)
Granted during the year 40,000 134 90
1,500,000 106 90
1,830,700 2 76
499,600 339-493 90
Forfeited during the year (54,800) 2 –
(40,000) 134 –
(35,145) 145 –
(251,350) 254-338 –
(345,650) 339-493 –
Exercised during the year 125,000 2 –
76,000 112 –
212,705 145 –
293,650 254-338 –
352,250 339-493 –
Outstanding at the end of the year 277,675 145 24
2,279,076 254-338 40
1,806,926 339-493 57
2,246,900 2 72
274,000 112 82
1,500,000 106 80
Exercisable at the end of the year 24,000 2 59
11,500 112 59
277,675 145 24
1,711,444 254-338 30
1,044,476 339-493 41

Year ended 31 December 2008

Shares arising Range of Weighted average remaining
out of options exercise prices contractual life (months)
Outstanding at the beginning of the year 583,826 145 47
2,135,869 254-338 53
2,416,055 339-493 71
Granted during the year - 145 –
Granted during the year 962,900 254-338 90
Granted during the year 350,000 112 90
Granted during the year 596,000 2 90
Forfeited during the year (16,051) 145 –
Forfeited during the year (274,693) 254-338 –
Forfeited during the year (410,829) 339-493 –
Exercised during the year (42,250) 145 –
Outstanding at the end of the year 525,525 145 35
2,824,076 254-338 52
2,005,226 339-493 50
350,000 112 89
596,000 2 89
Exercisable at the end of the year 525,525 145 35
Exercisable at the end of the year 1,885,276 254-338 40
Exercisable at the end of the year 1,261,219 339-493 37
* Includes stock options granted to employees of subsidiary companies

70 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

24 Employee stock compensation plans (Contd.)
Patni uses the intrinsic value method of accounting for its employee stock options. Patni has therefore adopted the pro-forma d isclosure
provisions as required by the Guidance Note on "Accounting for Employee Share-based payments" issued by the ICAI with effect fr om 1 April
2005. Had the compensation cost been determined in a manner consistent with the fair value approach described in the aforesaid Guidance
Note, Patni's net profit and EPS as reported would have been adjusted to the pro-forma amounts indicated below:

2009 2008
Profit for the year after taxation as reported 5,427,316 3,891,537
Add Stock based employee compensation determined under the intrinsic value method 118,560 268
Less Stock based employee compensation determined under the fair value method 173,614 77,747
Pro-forma profit 5,372,262 3,814,058
Reported earnings per equity share of Rs. 2 each
- Basic 42.32 28.70
- Diluted 41.47 28.65
Pro-forma earnings per equity share of Rs. 2 each
- Basic 41.89 28.13
- Diluted 41.05 28.08

The stock based compensation disclosed above is with respect to all stock options granted on or after 1 April 2005.
The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following
assumptions for Equity Linked Options:
2009 2008
Dividend yield 1.37%-1.78% 0.68%-1.09%
Weighted average dividend yield 1.53% 0.93%
Expected life 3.5-6.5 years 3.5-6.5 years
Risk free interest rates 5.94%-7.21% 7.10%-7.37%
Volatility 37.01%-44.16% 33.01%-39.45%
Weighted Average Volatility 39.42% 37.35%

The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following
assumptions for ADR Linked Options:
2009 2008
Dividend yield 1.18%-1.64% 0.68%
Weighted average dividend yield 1.61% 0.68%
Expected life 1.0-6.5 years 3.5-6.5 years
Risk free interest rates 0.52%-2.96% 3.04%-3.51%
Volatility 42.41%-50.79% 41.36%-44.76%
Weighted average volatility 47% 42.90%

The compensation expense for RSU's granted is accounted as per Intrinsic value method and shown under the head Personnel Cost a s stated
below:
2009 2008
Personnel Cost 118,560 268

On 18 August 2009, a further amendment was made to the Indian Income Tax Act, with retroactive effect from 1 April 2009, abolis hing the
provisions of FBT. Thus, for any exercises of stock options by the employee on or after 1 April 2009, the shares issued, or all ocated and
transferred by the Company, are no longer subject to FBT.

25 Amounts due to micro, small and medium enterprises

As at 31 December 2009, the company has no outstanding dues to any vendors registered with appropriate authority under the Micro, Small
and Medium Enterprises Development Act 2006. There have been no delays in settlement of dues to such vendors, warranting any pa yment
of interest as provided in the above Act (2008: Nil).

> 71
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

26 Summary of investments purchased and sold during the year
Investments purchased during the year ended 31 December 2009 (non-trade)
Year ended 31 December 2009
Units Cost of purchase
A) Long Term
Investment in Mutual Funds
G661 IDFC - Fixed Maturity Plan -Thirteen Months Series 1 - Plan B Growth 15,000,000 150,000
Kotak Fixed Maturity Plan 13Months Series 5 - Growth 20,000,000 200,000
Total 35,000,000 350,000
Investment in Others
Nabard Term Deposit 10% – 138,006
12.75pc Prakausali Investments NCD 250 250,000
Total 250 388,006
B) Current
Investment in Mutual Funds
Kotak Quarterly Interval Plan Series 2 - Dividend 33,631,919 336,319
1351 ICICI Prudential Interval Fund IV - Quarterly Interval Plan B - Institutional Dividend 15,235,050 152,351
Fortis Money Plus Fund-Institutional Plan-Weekly Dividend Option 60,085,153 600,989
Fortis Money Plus Fund-Institutional Plan-Weekly Dividend Option 130,876 1,309
M47 ABN Amro Overnight Fund - Institutional Plus - Daily Dividend 47,879,402 478,938
Birla Sun Life Liquid Plus-Institutional Plan- Weekly Dividend 199,472 1,995
Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 150,891,724 1,509,411
Birla Sun Life Liquid Plus-Institutional Plan- Weekly Dividend 1,130,328 11,306
Birla Sun Life Short Term Fund- Institutional Plan - Daily Dividend 52,530,063 525,590
B503DD Birla Sun Life Cash Plus - Institutional Premium - Daily Dividend -Reinvestment 359,094,513 3,597,947
DSP BlackRock Liquid Plus Fund - Institutional Plan - Weekly Dividend 31 31
DWS Liquid Plus Fund- Institutional Plan - Weekly Dividend 13,347 135
DWS Liquid Plus Fund- Institutional Plan - Weekly Dividend 34,243 345
DWS Ultra Short Term Fund - Institutional Daily Dividend 35,377,955 354,413
D170 DSP BlackRock Strategic Bond Fund - Institutional Plan - Weekly Dividend 501,053 502,737
DWS Insta Cash Plus Fund-Institutional Plan-Daily Dividend 191,450,449 1,920,408
DWS Ultra Short Term Fund - Institutional Weekly Dividend 51,868,414 522,840
Deutsche Insta Cash Plus Fund - Weekly Dividend -2101197131 12,009,313 120,713
DWS Ultra Short Term Fund - Institutional Dividend 200,765,248 2,008,959
DWS Ultra Short Term Fund - Regular Monthly Dividend Plan 18,914,676 200,000
IDFC-Liquid Plus Fund-Treasury Plan-Plan B-Weekly Dividend 21,721,711 219,258
IDFC-Liquid Plus Fund-Treasury Plan-Plan B-Weekly Dividend 119,006,832 1,201,272
IDFC CF Daily-Dividend (Institutional Plan) 7,507,195 79,438
GCDB IDFC Cash Fund - Institutional Plan B - Daily Dividend 730278/08 29,204,859 309,034
IDFC Cash Fund Institutional Plan B Daily Dividend 18,508,892 195,854
GCDB IDFC Cash Fund - Institutional Plan B - Daily Dividend 21349/70 32,361,688 342,438
GFCW IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C -
Weekly Dividend 730278/08 17,197,147 172,130
GFCW IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C -
Weekly Dividend 21349/70 168,796,070 1,689,578
GCCD IDFC Cash Fund - Super Institutional Plan C - Daily Dividend 21349/70 176,878,544 1,769,228
G98 IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C - Regular Dividend 17,215,204 172,152
G98 IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C - Regular Dividend 278,953,675 2,789,823
HDFC Cash Management Fund Treasury Advantage - Wholesale Plan Weekly Dividend Option 15,574,723 156,013
HDFC Liquid Fund-Premium Plan - Dividend-Daily 12,237,006 150,023
HDFC Cash Management Fund Treasury Advantage - Wholesale Plan Weekly Dividend Option 178,943,484 1,792,948
HDFC Liquid Fund-Premium Plan - Dividend-Daily 143,645,568 1,761,066
HSBC Floating Rate - Long Term Plan - Institutional Option - Weekly Dividend 23,557,893 264,642
HSBC Cash Fund Institutional Plus Daily Dividend 6,426,776 64,301

72 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

26 Summary of investments purchased and sold during the year (Contd.)
Investments purchased during the year ended 31 December 2009 (non-trade)
Year ended 31 December 2009
Units Cost of purchase
B) Current (Contd..)
Investment in Mutual Funds
JM Money Manager Fund - Super Plus Plan - Dividend option - Weekly dividend 26,270,815 269,865
JM Money Manager Fund - Super Plus Plan - Dividend option - Weekly dividend 227,570 2,329
JM High Liquidity Fund - Super Institutional Plan - Daily Dividend (92) 14,976,847 150,016
Kotak Liquid (Institutional Premium) - Daily Dividend Folio No. 281827/68 111,892,675 1,368,235
Kotak Quarterly Interval Plan Series 6 - Dividend 196,419 1,964
Kotak Quarterly Interval Plan Series 3 - Dividend 119,736 1,197
Kotak Quarterly Interval Plan Series 3 - Dividend 130,336 1,303
Kotak Quarterly Interval Plan Series 6 - Dividend 123,714 1,237
ICICI Prudential Interval Fund IV - Quarterly Interval Plan C - Institutional Dividend 314,125 3,141
Kotak Flexi Debt - Institutional Plan Weekly Dividend 20,379 205
Kotak Floater Long-Term-Weekly Dividend 200,805,015 2,023,842
Kotak Floater Long-Term-Weekly Dividend 33,108,810 333,705
Religare Ultra Short Term Fund - Institutional - Daily Dividend 89,696,882 898,377
Religare Liquid Fund - Super Institutional Daily Dividend 37,719,338 377,435
Lotus India Liquid Plus Fund-Institutional Premium -weekly dividend 126758 14,242,590 142,517
ICICI Prudential Flexible Income Plan-Weekly Dividend Plan 133,602,179 1,408,648
ICICI Prudential Flexible Income Plan-Weekly Dividend Plan 1,234,013 13,008
ICICI Prudential Floating Rate Plan-D - Dividend Daily 10,922,981 109,253
32ISD ICICI Prudential Institutional Liquid Plan Super Institutional
Daily Dividend - Reinvest Dividend 173,639,769 1,736,663
I526 ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 16,107,493 1,698,233
I542 ICICI Prudential Floating Rate Plan D - Daily Dividend 2,103,537 210,447
I526 ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 2,987,967 315,024
I564 ICICI Prudential Institutional Liquid Plan - Super Institutional Daily Dividend 3,143,761 314,455
Reliance Liquidity Fund-Dividend Plan-Daily Dividend Reinvestment 349,200,122 3,493,084
Reliance Medium Term Fund- Weekly Dividend Plan 119,651,815 2,045,892
Tata Floater Fund Weekly Dividend 226,993,592 2,288,847
Tata Floater Fund Weekly Dividend 4,949,480 49,894
Templeton India Ultra-short Bond Fund - Super Institutional - Dividend 148,674 1,488
Tata Liquid Super High Investment Plan - Daily 3,593,363 4,004,875
Tata Liquid Super High Investment Plan - Daily 2108400/73 36,798 41,012
Templeton India ultra short bond fund super Institutional plan
Daily Dividend Reinvestment 3109903669658 25,726,933 257,568
Total 4,103,368,227 49,539,693
Investment in Others
Reliance Capital Ltd- CP 200 98,209
Bank of India Cert of Deposit 5,000 464,569
Canara Bank Cert of Deposit 7,500 697,772
Syndicate Bank Cert of Deposit 5,000 463,314
9.75% ICICI Home Finance Bonds 1,000,000 100,000
9.25% IDBI Bank Ltd 2014 100 102,491
8.45% IRFC 2018 50 49,750
9.90% Syndicate Bank Bonds 50 51,750
11.15% Union Bank Bonds 50 55,940
Total 1,017,950 2,083,795

> 73
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

26 Summary of investments purchased and sold during the year (Contd.)
Investments sold during the year ended 31 December 2009 (non-trade)
Year ended 31 December 2009
Units Sale value Cost of purchase
A) Long term
Mutual Funds
Fortis Fixed Term Plan - Series 10 - Plan E - Institutional Plan –
Growth Option 10,000,000 110,769 100,000
Birla Sun Life Fixed Term Plan - Series AE- Institutional Growth 10,000,000 112,908 100,000
Birla Sun Life Fixed Term Plan - Series AK Institutional Growth 10,002,193 111,147 100,022
Birla Sun Life Fixed Term Plan - Series AM Institutional Growth 10,000,000 111,615 100,000
DSP BlackRock Fixed Maturity Plan - 15Months - Series 2 -
Institutional Plan - Growth 10,000,000 112,251 100,000
DWS Fixed Term Fund Series 46 - Institutional Plan- Growth Option 10,000,000 110,643 100,000
DWS Fixed Term Fund Series 47- Institutional Plan - Growth Option 20,000,000 219,804 200,000
DSP BlackRock Fixed Maturity Plan - 13Months - Series 1 -
Institutional Plan - Growth 20,000,000 221,476 200,000
DSP BlackRock Fixed Maturity Plan - 12 1/2 Months - Series 1 -
Institutional Plan - Growth 25,000,000 275,645 250,000
IDFC Fixed Maturity Plan - Yearly Series 19 - Plan B - Growth 9,000,000 99,402 90,000
IDFC Fixed Maturity Plan - Yearly Series 17 - Plan B - Growth 10,000,000 110,611 100,000
JM Fixed Maturity Fund - Series VII - 15 Months plan 1 (JM Fixed
Maturity Fund - VII - 15M1) - Institutional plan - Growth option 10,000,000 111,456 100,000
JM Fixed Maturity Fund - Series XI - 13 Months plan 1 (JM Fixed
Maturity Fund - XI - 13M1) - Institutional plan - Growth option 10,000,000 110,632 100,000
Kotak Fixed Monthsaturity Plan 14 Months Series 3
Institutional Plan - Growth 5,000,000 55,521 50,000
Kotak Fixed Monthsaturity Plan 14 Months Series 4 - Institutional - Growth 10,000,000 111,593 100,000
Kotak Fixed Monthsaturity Plan 13 Months Series 3
Institutional Plan - Growth 8,400,000 93,093 84,000
Kotak Fixed Monthsaturity Plan 15 Months Series 4 Institutional - Growth 35,000,000 392,020 350,000
Religare Fixed Monthsaturity Plan-14 Months-Series-III - Institutional Growth 6,000,000 66,721 60,000
Religare Fixed Monthsaturity Plan-13 Months-Series-IV - Institutional Growth 5,000,000 55,323 50,000
Religare Fixed Maturity Plan-375 days-Series-VII - Institutional Growth 7,000,000 77,071 70,000
Religare Fixed Monthsaturity Plan-15 Months-Series-II-Institutional-Growth 15,000,000 167,561 150,000
ICICI Prudential Fixed Maturity Plan series 41 - 14 Months Plan -
Institutional Growth Option 7,000,000 77,605 70,000
ICICI Prudential Fixed Maturity Plan series 43 - 13 Months Plan B -
Institutional Growth Option 5,000,000 55,438 50,000
ICICI Prudential Fixed Maturity Plan series 43 - 13 Months Plan D -
Retail Growth Option 10,000,000 110,452 100,000
Reliance Fixed Horizon Fund - VII - Series 1-Institutional Plan-Growth Option 8,000,000 89,350 80,000
Reliance Fixed Horizon Fund - VII - Series 4-Institutional Plan-Growth Option 20,000,000 221,482 200,000
IDFC Fixed Maturity Plan - Yearly Series 20 - Plan B - Growth 24,550,000 270,293 245,500
Tata Fixed Investment Plan - 1 Scheme A - Institutional Plan - Growth 5,000,000 55,445 50,000
Templeton Fixed Horizon Fund - Series VII - Plan C -
Institutional Plan - Dividend 10,000,000 110,585 100,000
Templeton Fixed Horizon Fund - Series VII - Plan D - Institutional
Plan - Dividend 13,000,000 142,332 130,000
HSBC Cash Fund - Institutional. Plus - Growth 14,190,973 195,559 150,000
Total 372,143,166 4,165,803 3,729,522

74 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

26 Summary of investments purchased and sold during the year (Contd.)
Investments sold during the year ended 31 December 2009 (non-trade)
Year ended 31 December 2009
Units Sale value Cost of purchase
B) Current
Mutual Funds
Kotak Quarterly Interval Plan Series 2 - Dividend 33,631,919 336,319 336,319
1351 ICICI Prudential Interval Fund IV - Quarterly Interval Plan B -
Institutional Dividend 15,235,050 152,351 152,351
Fortis Money Plus Fund-Institutional Plan-Weekly Dividend Option 17,079,730 170,978 170,805
M47 ABN Amro Overnight Fund - Institutional Plus -Daily Dividend 47,879,402 478,938 478,938
Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 3,828,372 38,300 38,322
Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 31,529,493 315,600 315,382
Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 31,523,909 315,461 315,700
B503DD Birla Sun Life Cash Plus - Institutional Premium -
Daily Dividend -Reinvestment 427,049,103 4,278,818 4,278,818
DSP BlackRock Money Manager Fund - Institutional Plan - Weekly Dividend 4,207 4,215 4,211
DWS Liquid Plus Fund- Institutional Plan - Weekly Dividend 2,232,927 22,518 22,430
DWS Liquid Plus Fund- Institutional Plan - Weekly Dividend 5,068,745 51,108 51,096
DWS Ultra Short Term Fund - Institutional Daily Dividend 35,377,955 354,413 354,413
D170 DSP BlackRock Strategic Bond Fund - Institutional Plan -
Weekly Dividend 501,053 502,908 502,737
DWS Insta Cash Plus Fund-Institutional Plan-Daily Dividend - 191,450,449 1,920,408 1,920,408
DWS Ultra Short Term Fund - Institutional Weekly Dividend 51,868,414 522,854 522,840
Deutsche Insta Cash Plus Fund - Weekly Dividend -2101197131 12,009,313 120,713 120,713
DWS Ultra Short Term Fund - Institutional Dividend 19,930,046 200,000 199,430
IDFC-Liquid Plus Fund-Treasury Plan-Plan B-Weekly Dividend 26,823,668 269,551 270,771
IDFC-Liquid Plus Fund-Treasury Plan-Plan B-Weekly Dividend 129,356,644 1,298,355 1,305,771
IDFC CF Daily-Dividend(Institutional Plan) 26,411,040 279,471 279,471
GCDB IDFC Cash Fund - Institutional Plan B - Daily Dividend 730278/08 29,204,859 309,034 309,034
IDFC Cash Fund Institutional Plan B Daily Dividend 18,508,892 195,854 195,854
GCDB IDFC Cash Fund - Institutional Plan B - Daily Dividend 21349/70 32,361,688 342,438 342,438
GFCW IDFC Money Manager Fund - Treasury Plan - Super Institutional
Plan C - Weekly Dividend 730278/08 17,197,147 172,152 172,130
GFCW IDFC Money Manager Fund - Treasury Plan - Super Institutional
Plan C - Weekly Dividend 21349/70 168,796,070 1,689,733 1,689,578
GCCD IDFC Cash Fund - Super Institutional Plan C -
Daily Dividend 21349/70 176,878,544 1,769,228 1,769,228
HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 558,609 5,600 5,596
HDFC Liquid Fund-Premium Plan - Dividend-Daily 12,237,006 150,023 150,023
HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 54,876,827 550,000 549,846
HDFC Liquid Fund-Premium Plan - Dividend-Daily 143,645,568 1,761,066 1,761,066
HSBC Floating Rate - Long Term Plan - Institutional Option - Weekly Dividend 6,364,664 71,500 71,501
HSBC Cash Fund Institutional Plus Daily Dividend 6,426,776 64,304 64,301
JM Money Manager Fund - Super Plus Plan - Dividend option -
Weekly dividend 52,062,389 535,000 531,895
JM Money Manager Fund - Super Plus Plan - Dividend option -
Weekly dividend 15,491,498 158,846 157,898
JM High Liquidity Fund - Super Institutional Plan - Daily Dividend (92) 14,976,847 150,016 150,016

> 75
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

26 Summary of investments purchased and sold during the year (Contd.)
Investments sold during the year ended 31 December 2009 (non-trade)
Year ended 31 December 2009
Units Sale value Cost of purchase
B) Current (Contd..)
Mutual Funds (Contd..)
Kotak Liquid (Institutional Premium) - Daily Dividend Folio No. 281827/68 111,892,675 1,368,235 1,368,235
Kotak Flexi Debt - Institutional Plan Weekly Dividend 14,222,461 142,728 142,775
Kotak Floater Long-Term-Weekly Dividend 111,349,775 1,122,330 1,122,298
Religare Ultra Short Term Fund - Institutional - Daily Dividend 24,461,595 245,000 245,000
Religare Liquid Fund - Super Institutional Daily Dividend 37,719,338 377,435 377,435
Lotus India Liquid Plus Fund-Institutional Premium-Weekly Dividend 126758 14,242,590 142,517 142,517
ICICI Prudential Flexible Income Plan-Weekly Dividend Plan 169,079,237 1,783,177 1,782,761
ICICI Prudential Flexible Income Plan-Weekly Dividend Plan 33,564,386 354,026 354,130
ICICI Prudential Floating Rate Plan-D - Dividend Daily 40,900,096 409,135 409,087
32ISD ICICI Prudential Institutional Liquid Plan Super Institutional
Daily Dividend - Reinvest Dividend 236,648,929 2,366,871 2,366,786
I526 ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 7,494,578 790,000 790,163
I564 ICICI Prudential Institutional Liquid Plan - Super Institutional
Daily Dividend 2,572,434 257,300 257,308
Reliance Liquidity Fund-Dividend Plan-Daily Dividend Reinvestment 390,893,284 3,910,145 3,910,145
Reliance Medium Term Fund- Weekly Dividend Plan 76,907,971 1,315,000 1,314,987
Tata Floater Fund Weekly Dividend 124,026,281 1,250,500 1,250,652
Templeton India Ultra-short Bond Fund - Super Institutional - Dividend 5,590,407 55,969 56,007
Tata Liquid Super High Investment Plan - Daily 4,171,033 4,648,700 4,648,700
Tata Liquid Super High Investment Plan - Daily 2108400/73 36,798 41,012 41,012
Templeton India Ultra Short Bond Fund Super Institutional Plan
Daily Dividend Reinvestment 17,979,144 180,000 180,000
Kotak Quarterly Interval Plan Series 6 - Dividend 16,217,285 162,173 162,175
Kotak Quarterly Interval Plan Series 3 - Dividend 9,972,489 99,725 99,739
Kotak Quarterly Interval Plan Series 3 - Dividend 10,855,311 108,553 108,641
Kotak Quarterly Interval Plan Series 6 - Dividend 10,214,396 102,144 102,144
ICICI Prudential Interval Fund IV - Quarterly Interval Plan C -
Institutional Dividend 12,814,125 128,141 128,141
Total 3,342,205,443 40,918,889 40,922,168
Others
11.15% Union Bank Bonds 50 56,013 55,940
8.45% IRFC 2018 50 50,450 49,750
9.25% IDBI Bank Ltd 2014 100 103,078 102,491
9.75% ICICI Home Finance Bonds 100 101,900 100,000
9.90% Syndicate Bank Bonds 50 51,844 51,750
Bank of India Cert of Deposit 5,000 476,511 464,569
Canara Bank CD 3,500 341,366 328,072
Nabard Bond 13,500 135,000 135,000
Reliance Capital Ltd- CP 200 99,463 98,209
Syndicate Bank Cert of Deposit 5,000 471,964 463,314
Total 27,550 1,887,589 1,849,095

76 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

27 Names of other banks, balances at year end and maximum amount of outstanding during the year
2009 2008
Fleet Bank, Boston, USA (formerly Bank Boston - USA) 227,621 303,497
(Maximum balance outstanding during the year: Rs. 511,252; 2008: Rs. 387,993)
Bank of Tokyo Mitsubishi Limited - Japan 19,406 61,920
(Maximum balance outstanding during the year: Rs. 81,922; 2008: Rs. 105,584)
Bank of Tokyo Mitsubishi Limited - Keihiguchi-Japan 1,058 16,449
(Maximum balance outstanding during the year: Rs. 33,123; 2008: Rs. 23,217)
Bank of Tokyo Mitsubishi UFJ - Japan 38,586 45,042
(Maximum balance outstanding during the year: Rs. 52,998; 2008: Rs. 44,663)
The Japan Net Bank – 159
(Maximum balance outstanding during the year: Rs. 160; 2008: Rs. 1,014)
ANZ Bank Australia - Australia 013-030-1982-72801 2,870 4,755
(Maximum balance outstanding during the year Rs. 36,150; 2008: Rs. 42,044)
ANZ Bank Australia - Australia 013-030-1982-72828 92,043 51,324
(Maximum balance outstanding during the year Rs. 93,839; 2008: Rs. 117,064)
Handels Bank - Kista Sweden 585-341-338 1,577 3,333
(Maximum balance outstanding during the year Rs. 3,333; 2008: Rs. 10,571)
Handels Bank - Kista Sweden 585-130-558 874 46
(Maximum balance outstanding during the year Rs. 4,014; 2008: Rs.9,302)
Handels Bank - Kista Sweden 43671179 (Euro account) 14,183 22,316
(Maximum balance outstanding during the year Rs. 22,316; 2008: Rs. 20,041)
Handelsbanken -Finland-A/c 313130-1290477 74,062 99,358
(Maximum balance outstanding during the year Rs. 92,691; 2008: Rs. 104,441)
Korea Exchange Bank - 611-016-118-609 1,812 1,752
(Maximum balance outstanding during the year: Rs. 1,799.; 2008: Rs. 1855)
ABN AMRO Bank N.V.-Netherlands A/c 43.47.90.427 19,208 15,869
(Maximum balance outstanding during the year: Rs. 41,421; 2008 : Rs. 54,541)
ABN AMRO Bank -Netherlands A/c 209 28 45
(Maximum balance outstanding during the year: Rs. 45; 2008: Rs. 43)
Standard Chartered Bank N.Y. – 29,896
(Maximum balance outstanding during the year: Rs. 29,335; 2008: Rs. 30,712)
Türkiye Garanti bankasiUSD-860 37,028 –
(Maximum balance outstanding during the year: Rs. 71,147; 2008: Rs. Nil)
Türkiye Garanti bankasiTL-727 530 –
(Maximum balance outstanding during the year: Rs. 1,078; 2008: Rs. Nil)
AK Bank – USD A/C 166- 64931 109,980 –
(Maximum balance outstanding during the year: Rs. 110,453; 2008: Rs. Nil)
AK Bank – TRL A/C 166- 64930 3–
(Maximum balance outstanding during the year: Rs. 3; 2008: Rs. Nil)
Credit Suisse-0842-1449715-71 5,199 –
(Maximum balance outstanding during the year: Rs. 5,338; 2008: Rs. Nil)
646,068 655,761

28 Supplementary statutory information

i) Managerial remuneration
2009 2008
Salaries and allowances 130,042 41,743
Contribution to provident fund 2,178 –
132,220 41,743
a) Managerial remuneration does not include Rs. 82,745 (including pension provision Rs. 26,338 and leave provision Rs. 4,379); ( 2008 : Rs.
140,454, including provision for pension : Rs. 68,508 and leave provisions Rs. 29,475) paid/accrued to manager by the subsidiar
y company
during the year ended 31 December 2009.

> 77
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

28 Supplementary statutory information (Contd.)
b) Sitting fees paid to non executive directors not included above aggregated Rs. 1420 (2008: Rs. 940) during the year ended 31 December
2009.
c) Commission expense in respect of Non-Executive directors not included above aggregated Rs. 29,345 (2008: Rs. 33,966).
d) Decrease in provision for pension liability aggregating to Rs. 3,575 for the year 2009 towards the pension plan of two non wh ole-time
directors Mr Ashok K Patni and Mr Gajendra K Patni has not been included above, since such pension liability arose on account of services
rendered prior to their appointment as non whole-time directors.
f) Computation of Net profit in accordance with Section 349 of the Companies Act, 1956, and calculation of commission payable to non-
whole time directors :-

Net profit after tax from ordinary activities 5,427,316

Add:
1. Managerial remuneration 132,220
2. Depreciation as per books of accounts 919,805
3. Commission to Non-Wholetime Directors 29,345
4. Pension expense * (3,575)
5. Directors Sitting Fees 1,420
6. Provision for Dimunition in Investment (28)
7. Loss on sale of Fixed assets 11,441
7. Provision for Doubtful debts 13,885
8. Provision for taxation 390,560 1,495,073
6,922,389
Less:
1. Depreciation under Section 350 of the Companies Act 919,805
2. Profit on sale of non-trade investments 471,493 1,391,298
Net profit on which commission payable 5,531,091
Commission payable to Non whole-time directors
Maximum allowed as per the Companies Act, 1956 at 1% 55,311
Commission expense in Profit & Loss Account in respect of Non whole-time directors 29,345
* Pension expense to founder directors Mr Ashok K Patni and Mr Gajendra K Patni.

ii) Value of imported and indigenous software consumables

2009 2008
Imported 1.36% 212 0.69% 154
Indigenous 98.64% 15,387 99.31% 22,103
100.00% 15,599 100.00% 22,257

iii) Value of imports calculated on C.I.F. basis:

2009 2008
Capital goods 127,418 259,076
Software consumables 212 154
127,630 259,230

iv) Expenditure in foreign currency

2009 2008
Overseas employee expenses 2,224,244 1,746,192
Travelling 104,237 182,539
Professional fees and consultancy charges 434,623 369,918
Subscription and registration fees 3,450 3,272
Others 273,170 217,197
3,039,724 2,519,118

78 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

28 Supplementary statutory information (Contd.)
v) Earnings in foreign currency
2009 2008
Sales and services income (on FOB basis) 17,395,396 15,189,620
Interest received 58,325 137,200
Other Income 3,806 2
17,457,527 15,326,822
vi) Dividend remitted in foreign currency
2009 2008
Number of non-resident shareholders 11
Number of equity shares held on which dividend was due (paid up value of Rs. 2 each) 18,255,396 18,255,396
Period to which dividend relates
- Final dividend
1 January 2008 to 31 December 2008 54,766 –
1 January 2007 to 31 December 2007 – 54,766
54,766 54,766
29 Statement of Utilisation of ADS Funds as of 31 December 2009
No. of shares Price Amount
Amount raised through ADS (6,156,250 ADSs @ $20.34 per ADS) 12,312,500 466 5,739,262
Share issue expenses 369,406
Net proceeds 5,369,856
Deployment :
1 Held as short term investments 1,000,893
2 Utilised for Capital expenditure for office facilities 4,248,140
3 Exchange loss 120,823
Total 5,369,856
30 Change in estimates
During the year ended 31 December 2008, the US Internal Revenue Service ('IRS') completed its assessment of tax returns for the years ended
31 March 2003, 2004 and 2005 of the US branch of the Company. Based on the completion of assessment of these years, the Company
reviewed the adequacy of the previously established tax exposure reserves with respect to these years and re-measured the estab lished tax
positions for later years based on the experience gained from the tax examination and accordingly, the following amounts have been included
in the income statement for the year ended 31 December 2008 as change in estimate:
2009 2008
Reversal of interest expense (i) – (113,412)
Increase in interest expense – 18,210
Decrease in income taxes - current – (319,027)
Increase in income taxes - deferred – 66,423
Total – (347,806)
The Statute of limitation period for the March, 2006 tax return of the US Branch of the Company expired in December, 2009 i.e. on expiry
of 3 years from the date of filing which was 15 December 2006. Hence the company has reversed the provision for that year on ac count of
taxes & interest in December, 2009. Accordingly the following amounts have been included in the Income Statement for the year e nded 31
December 2009 on account of above:
2009 2008
Reversal of interest expense (i) (55,816) –
Increase in interest expense – –
Decrease in income taxes - current (344,960) –
Increase in income taxes - deferred 8,892 –
Total (391,884) –
(i) Included in 'Other Income'
During the year the company received a favorable order from the Income Tax Appellate Tribunal allowing the set off of losses of 10A units
against Business Income. Based on the same the Company has reversed the relevant tax provisions amounting to Rs. 114,393.

> 79
 Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

31 Disclosure pursuant to AS-7, ' Construction Contracts ' ( Revised ) in respect of revenue contracts for customised software edvelopment
2009 2008
i Contract Revenue recognised for the year 2,682,526 2,459,912
ii Aggregate amount of contract costs incurred for all contracts in progress as at year end. 1,382,586 1,110,100
iii Recognised Profits (less recognised losses) for all contracts in progress as at year end. 712,013 758,041

32 Employee Benefit Plans

Gratuity Benefits
In accordance with the Payment of Gratuity Act, 1972, Patni provides for gratuity, a defined retirement plan covering all employees. The plan
provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee's d efined
portion of last salary and the years of employment with the Company.
Patni contributes each year to a gratuity fund based upon actuarial valuations performed by an actuary. The fund is administere d by Patni
through a trust set up for the purpose. All assets of the plan are owned by the Trust and comprise of approved debt and other securities and
deposits with banks.
Amount to be recognised in Balance Sheet
As at 31 December 2009 2008
Present Value of Funded Obligations 303,087 287,516
Fair Value of Plan Assets (273,266) (223,136)
Net Liability 29,821 64,380
Amounts recognised in Balance Sheet
Provision for Gratuity 29,821 64,380

Expense recognised in Statement of Profit and Loss Account

As at 31 December 2009 2008
Current Service Cost 50,837 48,370
Interest on Defined Benefit Obligations 17,432 21,515
Expected Return on Plan Assets (15,582) (15,937)
Net Actuarial Losses / (Gains) recognised in the Year (27,246) (17,046)
Total Included in "Employee Benefit Expense" 25,441 36,902

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
As at 31 December 2009 2008
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 287,516 255,999
Current Service Cost 50,837 48,370
Interest Cost 17,432 21,515
Actuarial Losses/(Gain) (28,789) (10,143)
Benefits Paid (23,909) (28,225)
Closing Defined Benefit Obligation 303,087 287,516
Change in Fair Value of Assets
Opening Fair Value of Plan Assets 223,136 228,521
Expected Return on Plan Assets 15,582 15,937
Actuarial Gain /(Losses) (1,543) 6,904
Contributions by Employer 60,000 –
Benefits Paid (23,909) (28,225)
Closing Fair Value of Plan Assets 273,266 223,137
Expected Employer's Contribution Next Year 50,000 50,000
Plan assets have been invested in corporate bonds, mutual funds and Government of India securities.
Financial Assumptions at the Valuation Date
Discount Rate (p.a.) 6.55% 5.85%
Expected Rate of Return on Assets (p.a.) 7.50% 7.50%
Salary Increase Rate (p.a.) 6.00% 8% for
first 3 years,
and 7% thereafter.

80 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Notes to the Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

32 Employee Benefit Plans (Contd.)
Composition of plan assets:
2009 % 2008 %
Central Government Securities 3,042 1% 6,143 3%
Investment in Government Securities based funds 200,808 74% 164,031 73%
Public Sector / Financials Institutions / Bank bonds 69,416 25% 52,963 24%
273,266 100% 223,137 100%

Pension Benefits
Founder Directors of the Company are entitled to receive pension benefits upon retirement or termination from employment at the rate of
50% of their last drawn monthly salary. The pension is payable from the time the eligible director reaches the age of sixty fiv e and is payable
to the directors or the surviving spouse. The liabilities for these pension plans are actuarially determined and periodically recognised. The plan
is not funded.
Amount to be recognised in Balance Sheet
As at 31 December 2009 2008
Present Value of Unfunded Obligations 125,133 134,821
Amounts recognised in Balance Sheet
Provision for Pension 125,133 134,821

Expense recognised in Statement of Profit and Loss Account

As at 31 December 2009 2008
Current Service Cost – –
Interest on Defined Benefit Obligations 7,708 7,707
Net Actuarial Losses / (Gains) recognised in the Year (11,284) 31,394
Total Included in "Employee Benefit Expense" (3,576) 39,101

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
As at 31 December 2009 2008
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 134,821 101,831
Current Service Cost – –
Interest Cost 7,708 7,707
Actuarial Losses/(Gain) (11,284) 31,394
Benefits Paid (6,112) (6,112)
Closing Defined Benefit Obligation 125,133 134,820
Expected Employer's Contribution Next Year 6,112 6,112
Financial Assumptions at the Valuation Date
Discount Rate (p.a.) 6.55% 5.85%
Salary Increase Rate (p.a.) 0.00% 0.00%

33 The Finance Act, 2009 has extended the availability of the 10-year income tax holiday by a period of one year such that the tax holiday will
be available until the earlier of fiscal year ending 31 March 2011 or 10 years after the commencement of a Company’s undertakin g. The fringe
benefit tax has also been abolished.

34 Prior year comparatives

Previous period figures have been appropriately reclassified to conform to the current year's presentations.

> 81
 Balance Sheet Abstract and Company’s General Business Profile

I. Registration Details
Registration No. 2 0 1 2 7 State Code 1 1

Balance Sheet Date 3 1 1 2 2 0 0 9

Date Month Year

II. Capital raised during the year

Public issue Right issue
N I L N I L
Bonus issue Private placement
N I L N I L
III. Position of mobilisation and deployment of funds
Total liabilities Total assets
3 6 9 0 9 2 9 5 3 6 9 0 9 2 9 5
Sources of funds
Paid-up capital including share application money Reserves and surplus
2 5 8 2 5 2 3 1 6 6 0 3 9 9
Secured loans Unsecured loans
9 4 4 7 N I L
Deferred Tax Liability
5 1 4 0 1
Application of funds
Net fixed assets Investments
7 4 0 8 5 2 0 2 2 6 7 3 9 5 5
Net current assets Deferred Tax Assets
1 8 9 7 4 8 9 1 1 8 3 6 3
Accumulated losses Miscellaneous expenditure
N I L N I L
IV. Performance of Company
Turnover Total expenditure
1 8 5 2 2 0 2 1 1 2 7 0 4 1 4 6
+/– Profit before tax +/– Profit after tax
+ 5 8 1 7 8 7 5 + 5 4 2 7 3 1 6
Earning per share in Rs. Dividend @ %
4 2 . 3 2 1 5 0 %
V. Generic names of three principal products of the Company (As per monetary terms)

Item no ITC code NIL Product description Computer Software and Services

For and on behalf of the Board of Directors

Narendra K Patni Jeya Kumar

Chairman Chief Executive Officer

Mumbai Arun Duggal Surjeet Singh Arun Kanakal

11 February 2010 Director Chief Financial Officer Company Secretary

82 Patni > Annual Report 2009

 Statement pursuant to section 212 of the Companies Act, 1956 relating to subsidiary companies
(Rs. in thousands)
Sr. Name of Subsidiary Reporting Exchange Share Reserves Total Total Investment Turnover Profit/(Loss) Tax Profit/(Loss) Proposed Country
No. Currency Rate capital Assets Liabilities Other than before Provision after Dividend
Investment taxation taxation
in Subsidiary

1 Patni Americas, Inc. 1USD = Rs. 46.52 2,638,934 2,438,427 8,581,528 3,445,599 – 15,816,179 699,693 (258,847) 958,541 – USA

2 Patni Computer Systems (UK) Limited 1GBP = Rs. 75.33 497,817 (241,201) 1,180,993 917,791 – 2,119,947 (168,738) 27,832 (196,570) – UK

3 Patni Computer Systems GmbH 1EUR = Rs. 67.07 131,320 (132,233) 84,106 85,019 – 202,009 (67,598) (3,829) (63,769) – Germany

4 Patni Telecom Solutions Private Limited INR 1.00 4,198 1,113,340 1,339,400 220,499 473,173 660,433 (14,530) (1,840) (12,691) – India

5 Patni Telecom Solutions Inc. 1USD = Rs. 46.52 17,312 767,288 931,401 142,199 – 370,311 (62,656) (24,406) (38,250) – USA

6 Patni Telecom Solutions (UK) Limited 1GBP = Rs. 75.33 5,821 226,535 496,133 262,811 – 510,544 (88,315) 4,724 (93,039) – UK

7 Patni Life Sciences Inc. 1USD = Rs. 46.52 534,146 (247,159) 526,451 237,771 – 802,515 (42,295) (12,988) (29,307) USA

8 Patni Computer Systems Brasil Ltda. 1BRL = Rs. 0.04 – – – – – – – – Brazil

9 Patni Computer Systems (Czech) s.r.o. 1CZK = Rs. 2.53 1,871 (1,737) 1,304 1,170 – – (1,146) – (1,146) – Czech
Republic

10 PCS Computer Systems Mexico SA de CV 1MXN = Rs. 3.55 – (38,004) 62,073 7,056 – – (36,730) – (36,730) – Mexico

11 Patni (Singapore) Pte Ltd 1SGD = Rs. 33.20 67,189 (48,650) 37,493 18,953 – – (48,218) (12) (48,206) – Singapore

Total 3,898,608 3,836,606 13,240,882 5,338,868 473,173 20,481,938 169,467 (269,366) 438,833

For and on behalf of the Board of Directors

Mumbai Jeya Kumar Pradip Shah Surjeet Singh Arun Kanakal

29 April 2010 Chief Executive Officer Director Chief Financial Officer Company Secretary
PATNI COMPUTER SYSTEMS LIMITED

> 83
 Management’s Discussion and Analysis of the
Consolidated Financials under Indian GAAP
Industry Structure and developments Inventory re-stocking began in 2Q09 and will continue to provide
positive impetus to IT spending growth in the first half of 2010. We
Global Markets Overview
expect end market demand to begin to gather pace from the second
According to the Dataquest Insight: 4Q09 Forecast Update Shows
half of 2010 as the economic recovery takes hold, while delayed
Little Change in IT Spending Outlook report by Gartner, the headline
spending will be "switched back on" and pent up demand will be
from this IT spending forecast update is that incrementally improved
released. Emerging economies, which suffered more moderate
global economic conditions should support a modestly larger increase
recessions than mature countries and regions such as the U.S. and
in overall IT spending in 2010 compared to 2009. Following an
Western Europe, will lead the recovery. Later, as IT spending priorities
estimated decline of 4.6% in global IT spending in 2009, our forecast
shift from cost optimisation to supporting business growth in a
for overall IT spending growth worldwide in 2010 has been increased
healthier global economy, spending on new technologies will
to 4.6% this quarter versus 3.3% last quarter.
accelerate.
However, the relative weakness of the U.S. dollar in 2H09, which we
(Disclaimer The Gartner Report described herein, Dataquest Insight:
project forward in our forecast, means that headline dollar growth in
4Q09 Forecast Update Shows Little Change in IT Spending Outlook
IT spending in 2010 will benefit from an exchange rate effect, which
represent) data, research opinion or viewpoints published, as part of
makes the growth forecast look more robust than the increase in IT
a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are
spending expressed in constant dollars. When expressed in constant not representations of fact. Each Gartner Report speaks as of its
dollars, which excludes the impact of exchange rate movements, we original publication date (and not as of the date of this Prospectus)
have actually reduced our forecast for global IT spending in 2010 and the opinions expressed in the Gartner Report(s) are subject to
from 1.7% last quarter to 1.5% this quarter. change without notice)
In addition according to the Dataquest Insight: 4Q09 Forecast
IT Industry Outlook
Update Shows Little Change in IT Spending Outlook report by
Nasscom Strategic Review 2010 states that the year 2009 ushered
Gartner, during the next two years IT vendors need to:
turbulence, with countries around the world plunging into the
• Prepare business and marketing plans for 2010 with multiple recession. The housing bubble burst, followed by the financial crisis
contingencies to mitigate potential down-side risk and capitalise creating a domino effect that, but, brought the world to a standstill.
on potential up-side opportunity, because the speed and breadth While robust fundamentals ensured that the recession impact on
of the recovery expected in 2010 is still highly uncertain. India was relatively moderate, in an increasingly globalised
Indicators of economic and business health, underlying the IT environment, it could not escape declining GDP growth, rising
market recovery, are still mixed and the market environment is unemployment and weakened consumer demand. However, prompt
unstable. action by governments across the world and stimulus packages
• Plan marketing campaigns, and sales and service engagements in helped to contain this downfall and make way for revival by the end
2010 with clearer value propositions aimed at CFOs and strategic of 2009.
business unit (SBU) leaders. The industry is estimated to aggregate revenues of $73.1 billion in
FY2010, with the IT software and services industry accounting for
• Compose and train account teams to execute in the changed sales
$63.7 billion of revenues. During this period, direct employment is
environment. This deep and prolonged recession is changing IT
expected to reach nearly 2.3 million, an addition of 90,000
buying centers' composition, values and dynamics
employees, while indirect job creation is estimated at 8.2 million. As
• Develop and/or expand financial models for project justification
a proportion of national GDP, the sector revenues have grown from
and sales training on selling to the financial buyer and business 1.2% in FY1998 to an estimated 6.1% in FY2010. Its share of total
leader. Indian exports (merchandise plus services) increased from less than
• Focus delivery organisations on the "lean" delivery of IT, with 4% in FY1998 to almost 26% in FY2010.
accelerated time to value, to appeal to the cost optimisation and Export revenues are estimated to gross $ 50.1billion in FY2010,
business goals of the IT buying center. growing by 5.4%over FY2009, and contributing 69% of the total IT-
The global economic outlook continues to improve and, along with BPO revenues. Software and services exports (including BPO) are
that recovery, there are signs that business executive confidence is expected to account for over 99% of total exports, employing around
returning. However, consumer confidence will remain fragile for 1.8 million employees.
much of 2010 with unemployment set to rise further as job creation The industry’s vertical market mix is well balanced across several
lags behind the economic recovery. mature and emerging sectors. 2009 saw increased adoption of

84 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

outsourcing from not only our biggest segment i.e., the Banking, personnel who provide technical services onsite on a temporary basis,
Financial Services and Insurance (BFSI), but also new emerging and by our trained professionals located normally at one or more of
verticals of retail healthcare and utilities. our nine offshore centers in India. Typically, at the initial stage of a
According to the report ,the beginning of the new decade heralds the project, we provide services through our onsite industry and
slow, but steady end of the worst recession in the past 60 years. technology experts and our transient onsite delivery personnel. By
Global GDP, after declining by 1.1% in 2009, is expected to increase applying our domain wedge approach, we deliver solutions that can
by 3.1% in 2010,and 4.2% in 2011, with developing economies be structured to scale to suit our clients’ needs. In certain cases we
growing thrice as fast as the developed economies. Improving provide dedicated offshore development centers, set up for a
economic conditions signifying return of consumer confidence and particular client. Through these offshore development centers we
renewal of business growth, is expected to drive IT spending going integrate our clients’ processes and methodologies and believe we are
forward. IT services is expected to grow by 2.4% in 2010, and 4.2% better positioned to provide comprehensive and long-term support.
in 2011 as companies coming out of recession harness the need for We maximise the cost efficiency of our service offerings by increasing
information technology to create competitive advantage. the offshore portion of the work as the client relationship matures. To
Organisations now recognise IT’s contribution to economic complement our domain wedge, we have aligned a majority of our
performance extending beyond managing expenditures. They expect sales and marketing teams to focus on specific industry sectors.
IT to play a role in reducing enterprise costs, not merely with cost Our Competitive Strengths
cutting but by changing business processes, workforce practices and We believe our competitive strengths enable us to deliver high-
information use. Movement toward SaaS and cloud computing, quality, efficient and scalable services. These strengths include:
shared services, and more selective outsourcing will take firmer shape
as near-term priorities to address constrained IT budgets. Focused Industry Expertise
We concentrate on industries where we believe we can generate
Government IT spending continues to rise across the world, focusing
sustained revenue growth, such as insurance, manufacturing, retail
on infrastructure, and security. Other areas of spending include BPM,
and distribution, financial services and communications, media and
data management, on demand ERP, virtualisation, and efforts to
utilities. Through our extensive experience in these industries, we
increase and deliver enterprise managed services on IP networks.
provide solutions that respond to technological challenges faced by
Business process outsourcing spending in 2010 is expected to be
our clients. We also focus on technology practices, specifically in
increasingly driven by F&A segment and procurement, followed by HR
product engineering services.
outsourcing. Providers will increase their focus on developing
platform BPO solutions across verticals and services. Successful Client Relationships
Growth in outsourcing is expected to supersede overall IT spend We have demonstrated the ability to build and manage our client
reaffirming its potential to not only support short term, tactical goals relationships. Our long-term relationships typically develop from
of cost savings, but also long term advantages of increased performing discrete projects to providing multiple service offerings
competitiveness, efficiencies and access to emerging markets. Within spread across the client’s businesses. Through our flexible approach,
outsourcing, off shoring will see increased acceptance as off shore we believe we offer services that respond to our clients’ needs
based providers grow and traditional service providers ramp up off irrespective of their size. By leveraging our industry experience with
shore delivery capabilities. India’s technology and business services our project management capabilities and breadth of technical
industry has flourished in the last decade. A bright future lies ahead expertise, we solidify and expand our client relationships.
and the industry has much to look forward to, with the potential to Extensive Suite of IT Services
quadruple its revenues over the next decade. Several macro-economic We provide a comprehensive range of IT services, including
and social trends will support the rise of the IT-BPO sector in the application development, application maintenance and support,
future, in core and emerging markets. packaged software implementation, infrastructure management
Opportunities and Threats services, product engineering, business process outsourcing and
Our Delivery Model quality assurance services. Our knowledge and experience span
We address our clients’ needs with our global delivery model, multiple computing platforms and technologies, which enable us to
through which we allocate resources in a cost-efficient manner using address a range of business needs and to function as a virtual
a combination of onsite client locations in North America, Europe and extension of our clients’ IT departments. We offer a broad spectrum
Asia and offshore locations in India. We believe an integral part of of services in select industry sectors, which we leverage to capitalise
our delivery is our industry knowledge, which we refer to as our on opportunities throughout our clients’ organizations.
domain expertise. Delivery and Operational Excellence
We refer to our own industry experts, business analysts and solutions Through our mature global delivery model, we deliver high quality
architects who are located primarily onsite with the client as our and cost-effective IT services from multiple locations in a reduced
“domain wedge”. These experts are supported by additional timeframe. We vary the composition of our employee resource pool,

> 85
 in terms of seniority and location, to maximise our productivity and We aim to develop new productivity tools, refine our software
efficiency. Our processes and methodologies have achieved Capability engineering techniques and maximise reuse of our processes. For
Maturity Model Integrated (CMMi) Level 5, the highest attainable example, we use automation testing to increase the efficiency of our
certification. We use project management tools to deliver services to project methodologies and for process management, defect tracking,
client specifications in a timely and reliable manner while maintaining audit management and contract management. We also apply this
a high level of client satisfaction. commitment to our infrastructure and we are constructing new
knowledge park campuses in India to provide world class
Highly-skilled Professionals
infrastructure, high standards of quality and secure delivery.
We have a highly qualified management team with a broad range of
experience in the IT industry. Our Chairman (previously also our Chief Build our Brand Globally
Executive Officer) is an entrepreneur and engineer who has been in While our “Patni” brand is an established and recognised brand in
the IT industry for over 30 years and has led us from our inception in India, we intend to increase recognition of our brand elsewhere in
1978. Most of our senior management team has worked as a team our client markets. We seek to achieve this through targeted analyst
for over 20 years. We use our competitive recruitment program to outreach programs, trade shows, white papers, sponsorships,
select the best talent from India’s premier engineering institutions. workshops, road shows, speaking engagements and global public
relations management. We believe that a stronger brand will facilitate
Our Strategy
our ability to gain new clients and to attract and retain talented
We seek to further enhance our position as a leading Indian provider
of integrated IT services and solutions through our global delivery professionals.
model. To achieve this we intend to: Pursue Strategic Acquisitions
Penetrate and Grow Strategic Client Accounts We seek to pursue selective strategic acquisitions to augment our
We have achieved strong revenue growth by focusing on select, long capabilities and to address gaps in industry expertise, technical
term customer relationships which we call strategic accounts. We aim expertise, service lines and geographic coverage. We will continue to
to expand the scope of our client relationships by leveraging our consider and seek acquisition opportunities which considerably widen
focused industry sector expertise with delivery excellence, responsive our industry and technology practices.
engagement models and breadth of services. We intend to focus on Competition
adding new strategic clients and further penetrating our existing We operate in a highly competitive environment and this competitive
customer relationships. We address the needs of our larger strategic pressure on our business is likely to continue. The market for IT
relationships through dedicated account managers who have services is rapidly evolving and highly competitive. We expect that
responsibility for increasing the size and scope of our service offerings competition will continue to intensify. We face competition or
to such clients. We aim to strengthen our sales and marketing teams,
competitive pressure from:
a majority of which are aligned to focus on specific industries.
• Indian IT services companies, such as Tata Consultancy Services
Strengthen and Broaden our Industry Expertise Limited, Infosys Technologies Limited, Wipro Limited, HCL
We intend to strengthen our understanding of key industries by Technologies Limited and Tech Mahindra;
investing in a strong base of industry experts, business analysts and
• International IT services companies, such as Accenture, Cognizant
solutions architects as well as considering select from targeted
Technology Solutions, Computer Sciences Corporation and Sapient
acquisitions. We believe that we can add more value than a general
Corporation;
service provider because we understand the specific industry
requirements of our clients. • divisions of large multinational technology firms such as IBM, and
Hewlett Packard Company, or Hewlett Packard;
Strengthen and Broaden our Service Lines
• in-house IT departments of large corporations;
We aim to deepen our existing client relationships through new and
more comprehensive service lines. In recent years we have added new • other international, national, regional and local firms from a
capabilities in line with our growth and customer needs. We variety of market segments, including major international
continually explore new initiatives through our internal centers of accounting firms, systems consulting and implementation firms,
excellence, which focus on innovation in specific technology applications software firms, service groups of computer
platforms or services. For example, we added quality assurance equipment companies, general management consulting firms,
services as a new service line, and developed increased capabilities programming companies and temporary staffing firms;
such as business intelligence, database administration and legacy • offshore service providers in other countries with low wage costs
system modernisation in other service lines. such as China and the Philippines, and countries in Eastern Europe
and Latin America; and
Optimise and Expand Delivery Capability
We are committed to enhancing our processes and methodologies by • involvement of third party intermediaries who negotiate IT services
investing in project management tools that improve our efficiency. and outsourcing contracts on behalf of their clients.

86 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

A number of our international competitors have set up operations in Internal control systems
India. Further, a number of our international competitors with We maintain internal control systems designed to provide reasonable
existing operations in India have ramped up their presence as assurance that assets are safeguarded, transactions are executed in
offshore operations in India have become an important element of accordance with management’s authorisation and properly recorded,
their delivery strategy. and accounting records are adequate for preparation of financial
Many of our competitors have significantly greater financial, technical statements and other financial information. The internal audit
and marketing resources and generate greater revenues than we do. function performs internal audit periodically to ascertain their
Clients may prefer vendors that have delivery centers located globally adequacy and effectiveness.
or are based in countries that are more cost-competitive than India. The Audit Committee which is a sub-committee to Board of Directors
Therefore, we cannot assure you that we will be able to retain our consists solely of independent directors. The Audit Committee
clients while competing against such competitors. We believe that monitors and provides effective supervision of our financial reporting
our ability to compete also depends in part on a number of factors process with a view towards ensuring accurate, timely and proper
beyond our control, including the ability of our competitors to disclosures coupled with transparency, integrity and quality of
attract, train, motivate and retain highly skilled technical employees, financial reporting. Our Audit Committee oversees the work carried
the price at which our competitors offer comparable services and the out in the financial reporting process by our management, including
extent of our competitors’ responsiveness to client needs the internal auditors and reviews the processes and safeguards
employed by each. In addition our Audit Committee has the
Segment-wise Performance
responsibility of oversight and supervision over our system of internal
Our operations pertain to provision of IT services and solutions to
controls over financial reporting, audit process, and process for
customers belonging to various industries such as insurance,
monitoring the compliance with related laws and regulations. The
manufacturing, retail and distribution, communications, media and
committee also holds discussions with Statutory Auditors, Internal
utilities and financial services and also to technology practices.
Auditors and the Management on matters pertaining to internal
Accordingly, revenues represented along industry classes comprise the
controls, auditing and financial reporting. The Committee reviews
principal basis of segmental information.
with the statutory auditors the scope and results of the audit.
We derive a significant proportion of our revenues from clients in the
In particular, our efforts to comply with Section 404 of the Sarbanes-
insurance, manufacturing, retail and distribution, communications,
Oxley Act of 2002 and the related regulations regarding our required
media and utilities and financial services industries. In addition, we
assessment of our internal controls over financial reporting and our
market our services to clients through our technology practices,
external auditors’ audit of that assessment requires the commitment
comprising our product engineering practice. The following table
of significant financial and managerial resources. We consistently
indicates the breakdown of our revenues by our industry and
assess the adequacy of our internal controls over financial reporting,
technology practices:
remediate any control deficiencies that may be identified, and validate
Industry Segments through testing that our controls are functioning as documented.
Year ended 31 December
Financial Condition (Rs. in thousands except share data)
2007 2008 2009
Year ended Year ended
Industry Practice
31 Dec. 2009 31 Dec. 2008
Insurance 23.6% 24.7% 29.7%
Share capital
Manufacturing Retail & Distribution (1) 27.0% 28.9% 29.0%
Balance at the beginning of the year 256,210 278,019
Financial Services 14.1% 12.8% 12.8%
Shares issued during the year
Communications, Media and Utilities (2) 18.3% 17.9% 13.5%
– ESOP plan 2,402 105
Technology Practice
Buyback of shares – (21,914)
Product Engineering 17.0% 15.7% 15.0%
Balance at the close of the year 258,252 256,210
Total 100.0% 100.0% 100.0%
The Company has established the 'Patni ESOP 2003' plan, under which
(1) From 1 January 2009, we have renamed our manufacturing
it issued 1,021,025 shares to -107 employees and 1 director during
segment industry practice as manufacturing, retail and
the year. The Company is authorised to issue up to 11,142,085 equity
distribution.
shares to eligible employees under its ESOP plan. In June 2009 at the
(2) From 1 January 2009, we have renamed our communications, Annual General Meeting the shareholders authorised the Company to
media and entertainment practice as communications, media and issue additional 8,000,000 equity shares to eligible employees under
utilities. the "Patni ESOP 2003 - Revised 2008" plan.
Outlook, Risks and Concerns Following these issuances of the Company’s equity shares during the
These have been discussed in detail in the Risk management section year, the issued, subscribed and paid-up share capital increased by
in this Annual Report. 1,021,025 shares.

> 87
 Reserves and surplus During 2009, the Company added Rs. 1,474.9 million to its gross
The Company transferred an amount of Rs. 542.7 million from its block of assets. This is represented by Rs. 972 million on acquisition
profit for the year to the general reserve, while Rs. 4,870.2 million of fixed assets in Noida SEZ, capitalisation of Rs. 972 million mainly
was retained in the profit and loss account. comprised of building of Rs. 879 million and the balance towards air
conditioners, electrical installations, furniture & fixtures, plant &
Secured loans
machinery hardware and plant & machinery software.
The Company acquires vehicles under finance lease for a non-cancelable
period of four years. The lease rental obligation in relation to such The Net increase of Rs. 154 million under Land Leasehold is mainly
vehicles is recorded under secured loans. As per the lease agreement, due to capitalisation of Kokapeta Land in Hyderabad.
the ownership of these vehicles would not transfer to the Company. The Net increase of Rs. 226 million under Computer Software is
mainly due to capitalisation of software licenses.
Net deferred tax liability
The Company recorded cumulative net deferred tax liability of Rs. 66.6 The net decrease of Rs. 1,134 million under CWIP due to
million as of 31 December 2009. The deferred tax liability represents capitalisation of Noida SEZ.
timing differences arising out of Costs and estimated earnings in Investments
excess of billings, Depreciation and U.S. branch profit taxes. Surplus cash generated from operations are invested in long-term and
Goodwill current money market instruments. Investments increased to
The excess of cost to the parent company of its investment in Rs. 17,751.9 million as of 31 December 2009 compared to
subsidiaries over the parent company’s portion of equity in the Rs. 11,771.3 million as of 31 December 2008.
subsidiaries, at the respective dates on which investments in Deferred tax asset (net)
subsidiaries were made, is recognised in the consolidated financial The Company recorded cumulative deferred tax asset (net) of
statements as goodwill. Goodwill recorded in the consolidated financial Rs. 893.3 million as of 31 December 2009. This relates to the
statements has not been amortised, but evaluated for impairment. subsidiary companies, Patni Americas Inc. USA, Patni Computer
The aggregate goodwill recorded in the financial statements Systems (Gmbh), Patni Telecom Solutions Private Limited (India), Patni
comprises the following: Telecom Solutions Inc (USA) and Patni Life Sciences Inc. The deferred
(Rs. in thousands) tax asset represents timing differences arising out of provisions for
Year ended Year ended retirement benefits, provision for bad and doubtful debts, deferred
31 Dec. 31 Dec. revenues , billings in excess of cost and estimated earnings, accrued
2009 2008 expenses and carry forward losses, unrealized loss on derivatives,
Balance at the beginning of the year 4,907,344 4,278,413 employee stock option costs, depreciations.
Effect of foreign currency translation (142,039) 628,931
Sundry debtors
Balance at the end of the year 4,765,305 4,907,344
Sundry debtors of Rs. 5,089.7 million (net of provision for doubtful
Fixed Assets (Rs. in thousands) debts amounting to Rs. 134.3 million) represents 16.2 per cent of
Year ended Increase/ revenues for the year ended 31 December 2009. During the year, the
31 December (Decrease) debts outstanding for a period exceeding six months decreased to 1.6
2009 2008 % per cent of gross debtors as compared to 7.2 per cent in the previous
Gross block year. Provision for doubtful debts as a percentage of sundry debtors
Land – freehold 171 171 0.0 increase to 2.7 per cent from 2.6 per cent in the previous year.
– leasehold 828,791 674,377 22.9 The age profile of debtors is given below:
Buildings and leasehold
Period in days Year ended Year ended
improvements 4,044,734 3,138,834 28.9
31 Dec. 31 Dec.
Computers, software and
2009 2008
other service equipment 4,112,578 3,872,301 6.2
0-180 98.4% 92.8%
Electrical installations 918,645 835,305 10.0
More than 180 1.6% 7.2%
Office equipments 1,070,113 1,023,153 4.6
Total 100.0% 100.0%
Furniture and fixtures 1,034,286 936,012 10.5
Vehicles 65,408 77,851 (16.0) Cash and bank balances
Intangible asset 1,052,355 1,094,141 (3.8) The Company recorded cash and bank balances of Rs. 2,952.6 million
Total 13,127,081 11,652,145 12.7 and Rs. 2,931.8 million as at 31 December 2009 and 2008,
Less: Accumulated depreciation 6,194,696 5,168,419 19.9 respectively. Bank balances include balances maintained both in India
Add: Capital work-in-progress 1,336,711 2,501,851 (46.6) and overseas. Bank balances in India include both rupee accounts and
Net fixed assets 8,269,096 8,985,577 (8.0) foreign currency accounts.

88 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

As at 31 December 2009 and 2008, the Company had cash and cash Provisions
equivalents (cash and bank balances including short term investments) Provision for taxation represents estimated income tax liabilities, both
of Rs. 19,826.9 million and Rs. 10,696.8 million, respectively. Cash in India and overseas. Provision for taxation (net of advance tax) as of
and cash equivalents represent 47.9 per cent and 38.8 per cent of 31 December 2009 was Rs. 1,302.3 million.
total assets as at 31 December 2009 and 2008, respectively.
As at 31 December 2009, provision for retirement benefits decreased
Cost and estimated earnings in excess of billings to Rs. 1,210.3 million from Rs. 1,379.0 million as at 31 December
Costs and estimated earnings in excess of billings represent revenues 2008.
recognised by the Company in excess of amounts billed. These Dividend on equity shares of Rs. 387.4 million represents dividend
amounts are billed after the milestones specified in the agreement are
payable to shareholders of the Company recommended by the Board
achieved and once customer acceptance is received. Cost and
of Directors and will be paid on approval by the shareholders at the
estimated earnings in excess of billings decreased to Rs. 918.2 million
annual general meeting. Dividend tax denotes taxes payable on the
during the year ended 31 December 2009 compared to Rs. 1,494.8
proposed dividend for 2009.
million in the year ended 31 December 2008 mainly due to the
consistent efforts on timely collections from the customers due to the Results of Operations
credit crisis prevailing in the global markets. The following table sets forth certain financial information for the
year ended 31 December 2009 as a percentage of revenues,
Loans and advances
calculated from the consolidated financial statements:
During the year ended 31 December 2009 advances recoverable in
cash or kind decreased to Rs. 380.4 million from Rs. 423.4 million as (Rs. in thousands)
at 31 December 2008. Amount % of income
During the year ended 31 December 2009 Security deposits Sales and service income 31,461,457 96.0%
decreased to Rs. 290.5 million from Rs. 314.8 million as at 31 Other income 1,294,216 4.0%
December 2008. Total income 32,755,673 100%
Loan to the Company’s employees which were outstanding as at 31 Personnel cost 18,357,288 56.0%
December 2009 was Rs. 40.1 million from Rs. 43.8 million as at 31 Selling, general and administration cost 6,913,024 21.1%
December 2008. Depreciation 1,420,905 4.3%

Provision for Income Tax has been computed on the basis of Transfer from revaluation reserves (81) -
Minimum Alternate Tax (MAT) in accordance with Sec 115JB of the Interest costs 77,200 0.2%
Income Tax Act, 1961, the company has recognised "MAT credit Total expenses 26,768,336 81.7%
entitlement" of Rs. 1,071 million as at 31 December 2009 (2008: Rs. Profit for the year before taxation 5,987,337 18.3%
631.9 million). Provision for taxation 121,195 0.4%
Profit for the year after taxation 5,866,142 17.9%
During the year ended 31 December 2009 amount paid to tax
authorities increased to Rs. 254.2 million from Rs. Nil million as at 31
Income
December 2008.
The Company’s sales and service income was Rs. 31,461.5 million in
During the year ended 31 December 2009 derivative Assets of 2009 from Rs. 31,172.7 million in 2008. Clients from the insurance,
increased to Rs. 97.5 million from Rs. 3.7 million as at 31 December manufacturing, and financial services industries contribute a large
2008 relate to Mark to Market gain on foreign exchange contracts. proportion of our sales and service income. In 2009, revenues from
Current liabilities these clients together contributed 71.5 per cent of our revenues.
Current liabilities primarily include creditors for goods and expenses The Company derives a significant proportion of its revenues from
of Rs. 283.0 million, which represent amounts payable to vendors for clients located in the United States. In 2009, the company derived
goods or services rendered. Billings in excess of cost and estimated 78.9 per cent of its revenues, from clients located in the United
earnings of Rs. 266.0 million denotes billings in excess of revenues States. However, strong revenue growth was achieved in other
recognised. Advances received from customers of Rs. 54.6 million regions and the business achieved a greater element of geographical
include amounts received from customers for the delivery of future diversification. The Company added 56 new clients during 2009.
services. Deferred revenues of Rs. 219.0 million relate to revenues for
Other income was Rs. 1,294.2 million in 2009 from Rs. 1,288.4
set up activities that are deferred and recognised over the period in
million in 2008. During 2009, other income comprised interest and
which the fees are earned and also include volume discounts earned
dividend income of Rs. 597.8 million, and IRS interest reversal of
by the customers. Related costs are also deferred in such instances
Rs. 78.8 million on account of completion of assessment by IRS for
and are grouped under ‘advances recoverable in cash or kind’.
the years ended 2005 and 2006 of Patni Americas Inc. Gain of
Derivative liability of Rs. 343.4 million relate to Marked to market loss
on foreign exchange contracts. Other liabilities of Rs. 3,483.6 million Rs. 470.2 million on the sale of investments and other miscellaneous
include provisions for employee related and other costs. income of Rs. 147.4 million.

> 89
 Personnel costs In 2009 the Company had tax reversals amounting to Rs. 856.3
Personnel costs were Rs. 18,357.3 million and Rs. 18,328.7 million in million of which Rs. 406.3 million was on account of completion of
2009 and 2008, respectively. These costs represent 56.0 per cent and assessment by the IRS for the years ended 2005 and 2006 of Patni
56.5 per cent of the Company’s total income in 2009 and 2008, Americas Inc, Rs. 336 million was on account of expiry of statute of
respectively. Personnel costs comprise salaries paid to employees in limitation with regard to year ended 31 March 2006 of the US
India and overseas staff expenses. Branch of the Company and Rs. 114 million was on account of
favourable order received by the Company from Income tax Appellate
Selling, general and administration expenses
Tribunal allowing a set off of section, 10A losses against the taxable
The Company incurred selling, general and administration expenses of
business income.
Rs. 6,913.0 million and Rs. 8,127.5 million, representing and 21.1
per cent and 25.0 per cent of total income in 2009 and 2008, The Company benefits from a tax holiday given by the Government of
respectively. Selling, general and administration expenses include India for the export of information technology services from specially
costs such as, subcontractor costs, travelling expenses, designated software technology parks and special economic zones
communication expenses, office expenses, legal and other located in India. As a result of these tax incentives, a substantial
professional fees, advertisement and publicity, and other portion of the Company’s pre-tax income has not been subject to
miscellaneous selling and administrative costs. significant tax in recent years.
The company has recognised "MAT credit entitlement" of Rs. 439.1
Depreciation
million for the year ended December 2009 (2008 : Rs. 347.8 million)
The Company provided Rs. 1,420.9 million and Rs. 1,141.5 million
by crediting to the Profit and loss account.
towards depreciation for 2009 and 2008, respectively. Depreciation
as a percentage of gross block of fixed assets was 10.8 per cent and The company has recognised "Fringe Benefit Tax" of Rs. 15.8 million
9.8 per cent for 2009 and 2008, respectively. for the year ended 31 December 2009 (2008 :- Rs. 49.4 million).

Due to adverse market conditions, during the year ended 31 Presently, we benefit from the tax holidays given by the Government
December 2009 the Company reviewed the recoverability of the of India for the export of IT services from specially designated
carrying amount of the IPR. Based on management estimate, the software technology parks and special economic zones in India. As a
expected discounted cashflows from the use of this IPR is lower than result of these incentives, which include a 10 year tax holiday from
the carrying amount and accordingly, an impairment charge of Rs. Indian corporate income taxes for the operation of most of our Indian
237.56 million for the year ended 31 December 2009 has been facilities, our operations have been subject to relatively low tax
recorded and included under depreciation in the consolidated profit liabilities. The tax benefits available for some of our facilities have
and loss account. expired and certain others will expire upon completion of 10 years,
however the tax holiday for the export of IT service will expire on
Interest 31 March 2011.
The Company incurred interest costs of Rs. 77.2 million and Rs. 79.0
The Company recorded net deferred tax credit of Rs. (49.7) million
million in 2009 and 2008, respectively. These costs mainly comprise
and Rs. (24.6) million for 2009 and 2008, respectively.
interest on tax assessments and interest on finance lease obligations
relating to vehicles acquired by the Company. Net Profit
Net profit was Rs. 5,866.1 million and Rs. 4,380.1 million in 2009
Provision for taxation
and 2008, respectively. Net profit as a percentage of total income
The Company provided for its tax liability both in India and overseas.
was 17.9 per cent and 13.5 per cent in 2009 and 2008, respectively.
The details of provision for taxes are as follows:
Provision for tax expense consists of the following: Development in Human Resources
(Rs. in thousands) As of 31 December 2009 we had 13,995 employees. Of these 11,102
2009 2008 were software professionals, of which 2,372 employees were onsite
Current taxes and 8,730 offshore.
- Indian 682,004 453,764 We believe that our ability to maintain and continue our growth
- Foreign (87,814) 273,508 depends to a large extent on our strength in attracting, training,
594,190 727,272 motivating and retaining our employees. We operate in eight major
Deferred tax expense /(credit) cities in India, which enables us to recruit technology professionals
- Indian 29,457 (64,652) from different parts of the country. The key elements of our human
- Foreign (79,155) 40,094 resource management strategy include recruitment, training and
(49,698) (24,558) development, compensation and retention.
544,492 702,714

90 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Financials under Indian GAAP

Auditors’ Report

To the Board of Directors of

Patni Computer Systems Limited and its subsidiaries

We have audited the attached consolidated Balance Sheet of ‘Consolidated Financial Statements’ prescribed by Companies
Patni Computer Systems Limited (“Patni” or “the Company” or (Accounting Standards) Rules, 2006.
“the Parent Company”) and its subsidiaries (as per the list
In our opinion and on the basis of information and explanation
appearing in Note 2.2 to the consolidated financial statements)
given to us, the consolidated financial statements give a true
[collectively referred to as the “Patni Group” or “the Group”] as
and fair view in conformity with the accounting principles
at 31 December 2009, the consolidated Profit and Loss
generally accepted in India:
Account and the consolidated Cash Flow Statement for the
year ended on that date, annexed thereto. i in the case of the consolidated Balance Sheet, of the state
of affairs of the Patni group as at 31 December 2009;
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an ii in the case of the consolidated Profit and Loss Account, of
opinion on these financial statements based on our audit. We the profit for the year ended on that date; and
conducted our audit in accordance with generally accepted iii in the case of the consolidated Cash Flow Statement, of the
auditing standards in India. Those standards require that we cash flows for the year ended on that date.
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes, examining on a test basis, For B S R & Co.
evidence supporting the amounts and disclosures in the Chartered Accountants
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a Natrajan Ramkrishna
reasonable basis for our opinion. Partner
We report that the consolidated financial statements have Membership No: 032815
been prepared by the Company’s management in accordance Mumbai
with the requirements of Accounting Standard 21 - 11 February 2010

> 91
 Consolidated Balance Sheet as at 31 December 2009

(Currency: Rs. in thousands except share data)

Note 2009 2008
SOURCES OF FUNDS
Shareholders’ funds
Share capital 3 258,252 256,210
Stock options outstanding 190,913 1,662
Reserves and surplus 4 35,060,229 28,143,233
35,509,394 28,401,105
Loan funds
Secured loans 5 9,447 17,548
Deferred tax liability 17 66,589 133,746
35,585,430 28,552,399
APPLICATION OF FUNDS
Goodwill 18 4,765,305 4,907,344
Fixed assets
Gross block 6 13,127,081 11,652,145
Less: Accumulated depreciation 6,194,696 5,168,419
Net block 6,932,385 6,483,726
Capital work-in-progress and capital advances 1,336,711 2,501,851
8,269,096 8,985,577
Investments 7 17,751,943 11,771,334
Deferred tax asset, net 17 893,334 945,241
Current assets, loans and advances
Sundry debtors 8 5,089,734 5,450,920
Cash and bank balances 9 2,952,622 2,931,750
Unbilled revenue 20 918,184 1,494,846
Loans and advances 10 2,561,375 2,006,508
11,521,915 11,884,024
Less: Current liabilities and provisions
Current liabilities 11 4,650,366 6,327,839
Provisions 12 2,965,797 3,613,282
7,616,163 9,941,121
Net current assets 3,905,752 1,942,903
35,585,430 28,552,399

The accompanying notes form an integral part of this Consolidated Balance Sheet.
As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

92 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Profit and Loss Account for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

Note 2009 2008
INCOME
Sales and service income 31,461,457 31,172,682
Other income 13 1,294,216 1,288,421
32,755,673 32,461,103
EXPENDITURE
Personnel costs 14 18,357,288 18,328,658
Selling, general and administration costs 15 6,913,024 8,127,528
Depreciation 6 1,420,905 1,141,533
Less: Transfer from revaluation reserve 4 81 81
Interest costs 16 77,200 78,959
26,768,336 27,676,597
Profit for the year before taxation 5,987,337 4,784,506
Provision for taxation 17 544,492 702,714
MAT credit entitlement 17 (439,135) (347,772)
Provision for taxation-fringe benefits 15,838 49,424
Profit for the year after taxation 5,866,142 4,380,140
Profit and loss account, brought forward 18,102,057 14,560,885
Amount available for appropriation 23,968,199 18,941,025
Proposed dividend on equity shares 387,383 384,473
Dividend tax 65,836 65,341
Transfer to general reserve 542,731 389,154
Profit and loss account, carried forward 22,972,249 18,102,057
Earnings per equity share of Rs. 2 each 22
- Basic 45.74 32.30
- Diluted 44.93 32.25
Weighted average number of equity shares used
in computing earnings per equity share
- Basic 128,254,916 135,590,677
- Diluted 130,560,132 135,815,016

The accompanying notes form an integral part of this Consolidated Profit and Loss Account.
As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

> 93
 Consolidated Cash Flow Statement for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

2009 2008
Cash flows from operating activities
Profit before taxation 5,987,337 4,784,506
Adjustments:
Depreciation, net of transfer from revaluation reserve 1,066,732 1,018,654
Loss /(profit) on sale of fixed assets, net 11,415 (15,027)
(Profit) on sale of investments, net (470,185) (394,050)
(Profit) /loss on revaluation of investments (2) 100
Amortisation of intangible assets 354,092 122,798
Dividend income (503,388) (505,963)
Interest income (26,492) (46,187)
Interest expense 1,534 1,568
Provision for doubtful debts and advances 105,450 76,682
Employee stock compensation costs 203,007 1,662
Deferred cancellation gains relating to roll-over cash flow hedges 202,686 –
Unrealised foreign exchange (gain)/loss (334,542) 878,669
Operating cash flows before working capital changes 6,597,644 5,923,412
(Increase) / decrease in sundry debtors (23,853) 656,243
Decrease / (increase ) in unbilled revenue 584,073 (141,468)
(Increase) /decrease in loans and advances (166,369) 311,198
(Decrease) /increase in billings in excess of cost and estimated earnings (22,257) 133,912
Increase /(decrease) in sundry creditors 78,606 (167,266)
(Decrease) /increase in advance from customers (8,829) 18,239
Increase /(decrease) in other liabilities 88,674 (74,660)
(Decrease)/increase in provision for retirement benefits (139,099) 221,326
Cash generated from operations 6,988,590 6,880,936
Income taxes paid (863,613) (1,066,897)
Net cash provided by operating activities (A) 6,124,977 5,814,039
Cash flows from investing activities
Purchase of fixed assets (920,311) (1,895,342)
Proceeds from sale of fixed assets 13,140 166,780
Purchase of non trade investments (54,072,111) (42,234,642)
Proceeds from sale of non trade investments 48,561,690 42,404,914
Dividend received 503,388 505,963
Interest received 18,237 49,803
Net cash (used) in investing activities (B) (5,895,967) (1,002,524)

94 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Cash Flow Statement (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

2009 2008
Cash flows from financing activities
Proceeds from issuance of share capital 259,257 5,824
Payment for buyback of shares – (2,370,000)
Dividend paid, including dividend tax (449,341) (487,953)
Interest paid (1,534) (1,568)
Proceeds from long term borrowings 2,786 6,501
Finance lease obligations repaid (10,886) (12,738)
Net cash (used in) financing activities (C) (199,718) (2,859,934)
Effect of changes in exchange rates (D) (8,420) (305,688)
Net increase in cash and cash equivalents during the year (A+B+C+D) 20,872 1,645,894
Cash and cash equivalents at the beginning of the year 2,931,750 1,285,857
Cash and cash equivalents at the end of the year 2,952,622 2,931,750

Notes to the Consolidated Cash flow statement

Cash and cash equivalents consist of cash on hand and balances
with banks. Cash and cash equivalents included in the cash flow
statements comprise the following balance sheet amounts.

2009 2008
Cash and cheques in hand 5,412 52,539
Balance with banks:
- Current accounts 2,578,270 2,619,412
- Exchange earners foreign currency account 602,918 424,095
- Effect of changes in Exchange rate (233,978) (164,296)
2,952,622 2,931,750

The accompanying notes form an integral part of this consolidated cash flow statement.
As per attached report of even date.
For B S R & Co. For and on behalf of the Board of Directors
Chartered Accountants
Narendra K Patni Jeya Kumar
Chairman Chief Executive Officer

Natrajan Ramkrishna
Partner Arun Duggal Surjeet Singh Arun Kanakal
Membership No: 032815 Director Chief Financial Officer Company Secretary
Mumbai
11 February 2010

> 95
 Notes to the Consolidated Financial Statements for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

1 Background 2 Significant accounting policies
Patni Computer Systems Limited ('Patni' or 'the Company' or 'the 2.1 Basis of preparation of consolidated financial statements
Parent Company') was incorporated on 10 February 1978 under The accompanying consolidated financial statements have been
the Companies Act, 1956. On 18 September 2003, the Company prepared in compliance with the requirements of the Companies
converted itself from a Private Limited company into a Public Act, 1956, guidelines issued by the Securities and Exchange
Limited company. In February 2004, Patni completed initial Board of India ('SEBI') and Generally Accepted Accounting
public offering of its equity shares in India comprising fresh issue Principles ('GAAP') in India, under the historical cost convention
of 13,415,200 shares and sale of 5,324,000 equity shares by the with the exception of land and buildings of Patni, which have
existing shareholders. been revalued, on the accrual basis of accounting. GAAP
In December 2005, Patni issued 5,125,000 American Depository comprises mandatory accounting standards as specified in the
Shares ('ADSs') at a price of US$ 20.34 per ADS. There was a Companies (Accounting Standards) Rules, 2006 issued by the
secondary offering of additional 1,750,000 ADSs to the existing Central Government, in consultation with National Advisory
shareholders. Patni also issued 1,031,250 ADSs at the price of Committee on Accounting Standards ('NACAS') and relevant
US$ 20.34 per ADS on the exercise of Greenshoe option by the provisions of Companies Act, 1956, to the extent applicable.
underwriters. Each ADS represented two equity shares of Rs. 2 The preparation of the consolidated financial statements in
each fully paid-up. accordance with generally accepted accounting principles
requires that management makes estimates and assumptions
Patni owns 100% equity interest in Patni Americas, Inc. (formerly
that affect the reported amount of assets and liabilities and
Patni Computer Systems, Inc.), a company incorporated in USA,
disclosure of contingent liabilities as of the date of consolidated
Patni Computer Systems (UK) Limited, a company incorporated
financial statements and the reported amounts of revenue and
in UK, Patni Computer Systems GmbH, a company incorporated
expenses during the reporting period. Management believes that
in Germany and Patni Computer Systems Brasil Ltda, a company
the estimates used in the preparation of financial statements are
incorporated in Brazil. In April 2003, Patni Americas, Inc., USA
prudent and reasonable. Actual results could differ from these
acquired 100% equity interest in The Reference Inc. a company
estimates. Any revision to accounting estimates is recognised
incorporated in USA. In November 2004, Patni Americas, Inc.
prospectively in the current and future periods.
acquired 100% equity in Patni Telecom Solutions Inc., USA and
its subsidiaries. In July 2007, Patni Americas, Inc. acquired Patni 2.2 Basis of consolidation
Life Sciences Inc, (formerly known as Taratec Development These consolidated financial statements include the financial
Corporation), a company incorporated in New Jersey, USA, for statements of Patni Computer Systems Limited and its subsidiaries.
consideration in cash. The subsidiaries considered in the consolidated financial
statements as at 31 December 2009 are summarised below:
In July 2007, Patni UK acquired business and assets of Logan
Orviss International ('LOI'), a European telecommunications Name of the subsidiary Country of %
consulting services company in a business combination. In March incorporation shareholding
2008, Patni UK set up a subsidiary in Czech Republic, named Patni Americas Inc. USA 100
Patni Computer Systems (Czech) s.r.o. In December 2008, the Patni Computer Systems (UK) Limited UK 100
company set up a subsidiary in Mexico named PCS Computer Patni Computer Systems GmbH Germany 100
Systems Mexico, SA de CV. Patni also operates through foreign Patni Telecom Solutions Inc. USA 100
branch offices in USA, Japan, Sweden, Korea, Netherlands, Patni Telecom Solutions Private Ltd. India 100
Australia, Finland, Dubai, South Africa,Turkey, Ireland, Romania Patni Telecom Solutions (UK) Ltd. UK 100
and Switzerland. In June 2009, the Company has set up a Patni Life Sciences Inc. USA 100
subsidiary in Singapore named Patni (Singapore) Pte Ltd. Patni Computer Systems Brasil Ltda Brazil 100
Patni Computer Systems (Czech) s.r.o. Czech Republic 100
Patni together with its subsidiaries (collectively, "Patni Group" or
PCS Computer Systems Mexico. S.A. Mexico 100
"the Company") is engaged in IT consulting, software
Patni (Singapore) Pte Ltd. Singapore 100
development and Business Process Outsourcing ("BPO"). The
Group provides multiple service offerings to its clients across These consolidated financial statements are prepared in
various industries comprising financial services, insurance accordance with the principles and procedures prescribed by
services, manufacturing, retail and distribution, communications, Accounting Standard 21-"Consolidated Financial Statements"
media and utilities and technology services (comprising ('AS-21') for the purpose of preparation and presentation of
independent software vendors and product engineering). The consolidated financial statements.
various service offerings comprise application development, The financial statements of the Parent Company and its
application maintenance and support, packaged software subsidiaries have been combined on a line-by-line basis by adding
implementation, infrastructure management services, product together the book values of like items of assets, liabilities, income
engineering services, quality assurance services and BPO services. and expenses after eliminating intra-group balances/transactions
and resulting unrealized profits in full. Unrealized losses resulting

96 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

from intra-group transactions have also been eliminated unless is reduced to its recoverable amount. The reduction is treated as
cost cannot be recovered in full. The amounts shown in respect an impairment loss and is recognised in the profit and loss
of accumulated reserves comprises the amount of the relevant account. If at the balance sheet date there is an indication that a
reserves as per the balance sheet of the Parent Company and its previously assessed impairment loss no longer exists, the
share in the post acquisition increase/decrease in the relevant recoverable amount is reassessed and the asset is reflected at the
reserves/accumulated deficit of its subsidiaries. recoverable amount subject to a maximum of depreciable
Consolidated financial statements are prepared using uniform historical cost.
accounting policies across the Group. 2.5 Goodwill
2.3 Fixed assets and depreciation The excess of cost to the Holding Company of its investment in
Fixed assets are stated at cost less accumulated depreciation, subsidiaries over the Holding Company's portion of equity in the
except for items of land and buildings of Patni, which were subsidiaries, at the respective dates on which investments in
revalued in March 1995. Cost includes inward freight, duties, subsidiaries were made, is recognised in the consolidated
taxes and incidental expenses related to acquisition and financial statements as goodwill. The Holding Company's portion
installation of the asset. Depreciation is provided on the Straight of equity in the subsidiaries is determined on the basis of the
Line Method ('SLM') based on the estimated useful lives of the book value of assets and liabilities as per the financial statements
assets as determined by the management. For additions and of the subsidiaries as on the date of investment.
disposals, depreciation is provided pro-rata for the period of use. The goodwill recorded in these consolidated financial statements
The rates of depreciation based on the estimated useful lives of has not been amortised, but instead evaluated for impairment.
fixed assets are higher than those prescribed under Schedule XIV The Group evaluates the carrying amount of its goodwill
to the Companies Act, 1956. The useful lives of fixed assets are whenever events or changes in circumstances indicate that its
stated below: carrying amount may be impaired.
Asset Useful life (in years) 2.6 Leases
Leasehold land and Over the lease period or the In accordance with Accounting Standard 19 “Accounting for
improvements useful life of the assets, leases”, assets acquired on finance leases, have been recognised
which ever is shorter as an asset and a liability at the inception of the lease, at an
Buildings 40 amount equal to the lower of the fair value of the leased asset or
Electrical installations 8 the present value of the future minimum lease payments. Such
Computers, computer software leased assets are depreciated over the lease term or its estimated
and other service equipments 3 useful life, whichever is shorter. Further, the payment of
Furniture and fixtures 3-8 minimum lease payments have been apportioned between
Office equipments 3-8 finance charges, which are debited to the profit and loss
Vehicles 4-5 account, and reduction in lease obligations recorded at the
inception of the lease.
Intangible Assets
Intangible assets acquired either through business acquisition or Lease arrangements, where the risks and rewards incidental to
individually are amortised over their respective individual ownership of an asset substantially vests with the lessor, are
estimated useful lives in proportion to the economic benefits recognised as operating leases. Lease payments under operating
consumed in each period. Intangible assets comprise customer lease are recognised as an expense in the profit and loss account.
and technology related intangibles and are being amortised over 2.7 Revenue and cost recognition
a period of 3-10 years. The estimated useful life of an identifiable The Group derives its revenues primarily from software services
intangible asset is based on a number of factors including the and to a lesser extent from BPO services. Revenue from time-and-
effects of obsolescence, demand, competition and other material contracts is recognised as related services are rendered.
economic factors (such as the stability of the industry, and Revenue from fixed-price contracts is recognised on a percentage
known technological advances) and the level of maintenance of completion basis, measured by the percentage of costs
expenditures required to obtain the expected future cash flows incurred to-date to estimated total costs for each contract. This
from the asset. method is used because management considers costs to be the
2.4 Impairment of assets best available measure of progress on these contracts.
The Group assesses at each balance sheet date whether there is Contract costs include all direct costs such as direct labour and
any indication that an asset may be impaired. If any such those indirect costs related to contract performance, such as
indication exists, the Group estimates the recoverable amount of depreciation, satellite link costs and foreign travel costs. Selling,
the asset. If such recoverable amount of the asset or the general, and administrative costs are charged to expense as
recoverable amount of the cash generating unit which the asset incurred. Provisions for estimated losses on uncompleted
belongs to, is less than its carrying amount, the carrying amount contracts are made in the period in which such losses are
determined. Changes in job performance, job conditions,

> 97
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

estimated profitability and final contract settlements may result Gratuity
in revision to costs and income and are recognised in the year in Patni provides for gratuity, a defined benefit retirement plan (the
which the revisions are determined. "Gratuity") covering eligible employees. In accordance with the
The asset, “Costs and estimated earnings in excess of billings on Payment of Gratuity Act, 1972 the Gratuity plan provides a lump
uncompleted contracts”, represents revenues recognised in sum payment to vested employees at retirement, death,
excess of amounts billed. These amounts are billed after the incapacitation or termination of employee, of an amount based
milestones specified in the agreement are achieved and the on the respective employee's salary and the tenure of
customer acceptance for the same is received. The liability, employment. Liabilities with regard to the Gratuity Plan are
“Billings in excess of costs and estimated earnings on determined by actuarial valuation carried out by an independent
uncompleted contracts”, represents billings in excess of revenues actuary at the balance sheet date using the Projected Unit Credit
recognised. With effect from 1 January 2009 "Costs and Method, which recognises each period of service as giving rise to
estimated earnings in excess of billings on uncompleted additional unit of employee benefit entitlement and measures
contracts" has been disclosed as Unbilled revenue. each unit separately to build up the final obligation.
Revenue from maintenance contracts is recognised ratebly over The obligation is measured at the present value of the estimated
the term of maintenance. Direct and incremental contract future cash flows. The discount rates used for determining the
origination and set up costs incurred in connection with present value of the obligation under defined benefit plans, is based
support/maintenance service arrangements are charged to on the market yields on Government securities as at the balance
expense as incurred. These costs are deferred only in situations sheet date. Based upon actuarial valuation, the Company
where there is a contractual arrangement establishing a contributes all the ascertained liabilities to the Patni Computer
customer relationship for a specified period. The costs to be Systems Employees Gratuity Fund Trust (the "Trust"). Trustees
deferred are limited to the extent of future contractual revenues. administer contributions made to the Trust and contributions are
Further, revenue attributable to set up activities is deferred and invested in specific investments a permitted by law. Actuarial gains
recognised systematically over the years that the related fees are and losses are recongnised immediately in the profit & loss account.
earned, as services performed during such period do not result in Pension
the culmination of a separate earnings process. Certain directors of the Group are entitled to receive pension
The Group grants volume discounts to certain customers, which benefit upon retirement or on termination from employment @
are computed based on a pre-determined percentage of the total 50% of their last drawn monthly salary. The pension is payable
revenues from those customers during a specified period, as per from the time the eligible director reaches the age of sixty-five in
the terms of the contract. These discounts are earned only after respect of Founder directors of Patni India and seventy one in
the customer has provided a specified cumulative level of respect of Executive director in employment with Patni USA, and
revenues in the specified period. The Company reports revenues is payable to the director or the surviving spouse. The liability for
net of discounts offered to customers. pension is actuarially determined by an independent actuary at
The Group estimates the total number of customers that will the end of each financial year using the Projected Unit Credit
ultimately earn these discounts, based on which a portion of the Method, which recognises each period of service as giving rise to
revenue on the related transactions is allocated to the services additional unit of employee benefit entitlement and measures
that will be delivered in the future. each unit separately to build up the final obligation.
Warranty costs on sale of services are accrued based on The obligation is measured at the present value of the estimated
management's estimates and historical data at the time related future cash flows. The discount rates used for determining the
revenues are recorded. present value of the obligation under defined benefit plans, is
Revenues from BPO Services are derived from both time based based on the market yields on Government securities as at the
and transaction priced contracts. Revenue is recognised as the balance sheet date. The plan is not funded. Actuarial gains and
related services are performed, in accordance with the specific losses are recongnised immediately in the profit & loss account.
terms of the contracts with the customer. Others
Dividend income is recognised when the Group's right to receive Patni USA adopted a 401(k) salary deferral profit sharing plan,
dividend is established. Interest income is recognised on the time which enables employees to make pre-tax contributions. Patni
proportion basis. USA does not match employee contributions to the plan.
2.8 Employee retirement and other benefits Patni provides compensatory-offs to its employees, which entitle
Provident fund the employees to avail paid leave in future periods for services
In accordance with Indian regulations, all employees of Patni already rendered. These entitlements are not encashable by the
receive benefits from a provident fund, which is a defined employees. Patni makes provision for such compensated
contribution retirement plan. Contributions to the provident absences by estimating the likely salary payable to the employees
fund are charged to the consolidated profit and loss account in availing such leave based on historical data of such entitlements
the period in which the contributions are incurred. availed in the past.

98 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

2.9 Foreign currency transactions and translation with contingencies, AS 11 (revised 2003), The Effects of Changes
Transactions in foreign currency are recorded at the exchange in Foreign Exchange Rates, to the extent it deals with the
rate prevailing on the date of the transaction. Foreign currency ‘forward exchange contracts’ and AS 13, Accounting for
denominated monetary assets and monetary liabilities at the Investments, except to the extent it relates to accounting for
year-end are converted at the year-end exchange rate. Exchange investment properties, will stand withdrawn only from the date
rate differences resulting from foreign exchange transactions AS 30 becomes mandatory (1 April 2011 for the Company).
settled during the year, including year-end conversion of Accordingly, the Company continues to comply with the
monetary assets and monetary liabilities are recognised in the guidance under these accounting standards; AS 4 – relating to
consolidated profit and loss account. Contingencies, AS 11 – relating to forward contracts and AS 13
The consolidated financial statements are reported in Indian until AS 30 becomes mandatory. Consequent to the adoption of
rupees. The transaction of the local currency of each of the integral the Standard, the resulting gain of Rs. 19,133 has been adjusted
foreign branches within the group into Indian rupees is performed to the shareholder's fund as on 1 January 2008.
in respect of assets and liabilities other than fixed assets using the Effective 1 January 2008, based on the recognition and
exchange rate in effect at the year end and revenue and expense measurement principles set out in the AS 30, changes in the fair
items other than depreciation cost using prevailing exchange rate values of derivative financial instruments designated as cash flow
at the date of transactions. Fixed assets are translated at exchange hedges were recognised directly in shareholders’ fund and
rates on the date of transactions and depreciation on fixed assets reclassified into the profit and loss account upon the occurrence
is translated at the exchange rates used for translation of the of the hedged transaction. Changes in fair value relating to the
underlying fixed assets. Net exchange difference resulting from the ineffective portion of the hedges and derivatives not designated
translation of financial statements of foreign branches are as hedges were recognised in the profit and loss account as they
recognised in the consolidated profit and loss account. arose.
Pursuant to para 24 of AS-11 (revised 2003), the financial 2.11 Investments
statements of the foreign subsidiaries, being non-integral Long-term investments are stated at cost, and provision for
operations, are translated into Indian rupees as follows: diminution is made when, in the management's opinion, there is
a) Income and expense items are translated by using an a decline, other than temporary, in the carrying value of such
appropriate monthly weighted average exchange rate for investments. Current investments are carried at lower of cost and
the periods. fair value.
b) Assets and liabilities, both monetary and non-monetary, 2.12 Taxation
are translated at the closing rate. Income tax expense comprises of current tax expense & deferred
c) All resulting exchange differences are accumulated in a tax expense or credit computed in accordance with the relevant
foreign currency translation reserve which is included provisions of the Income Tax Act, 1961. Provision for current
under Reserves and Surplus. taxes is recognised under the taxes payable method based on the
2.10 Derivative and hedge accounting estimated tax liability computed after taking credit for
The Company enters into forward foreign exchange allowances and exemptions in accordance with the Indian
contracts/option contracts (derivatives) to mitigate the risk of Income-tax Act, 1961.
changes in foreign exchange rates on forecasted transactions. Deferred tax assets and liabilities are recognised for the future tax
The Company enters into derivative financial instruments, where consequences attributable to timing differences that result
the counterparty is a bank. between the profits offered for income taxes and the profits as
In December 2007, the ICAI issued AS 30, Financial Instruments: per the financial statements of the Company. Deferred tax assets
Recognition and Measurement. Although AS 30 becomes and liabilities are measured using the tax rates and the tax laws
recommendatory in respect of accounting periods commencing that have been enacted or substantively enacted by the balance
on or after 1 April 2009 and mandatory in respect of accounting sheet date. The effect on deferred tax assets and liabilities of a
periods commencing on or after 1 April 2011, in March 2008 the change in tax rates is recognised in the period that includes the
ICAI announced that the earlier adoption of AS 30 is enactment rate. Deferred tax assets in respect of carry forward
encouraged. AS 30, along with limited revision to other losses are recongnised only to the extent that there is virtual
accounting standards has currently not been notified pursuant to certainty that sufficient future taxable income will be available
Companies (Accounting Standard) Rules, 2006. against which such deferred tax asset can be realised. Other
deferred tax assets are recognised only if there is a reasonable
On 1 January 2008, the Company early adopted AS 30 and the
certainty that sufficient future taxable income will be available
limited revisions to other accounting standards which come into
against which such deferred tax assets can be realised. Deferred
effect upon adoption of AS 30. AS 30 states that particular
tax assets are reviewed as at each balance sheet date and written
sections of other accounting standards; AS 4, Contingencies and
down or written-up to reflect the amount that is reasonably /
Events Occurring after Balance sheet Date, to the extent it deals
virtually certain (as the case may be) to be realised.

> 99
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

Minimum Alternate Tax ('MAT') paid in accordance with the tax the weighted average number of equity shares and also the
laws, which gives rise to future economic benefits in the form of weighted average number of equity shares that could have been
adjustment of future income tax liability, is considered as an issued on the conversion of all dilutive potential equity shares.
asset if there is convincing evidence that the Company will pay The dilutive potential equity shares are adjusted for the proceeds
normal tax after the tax holiday period. Accordingly, it is receivable, had the shares been actually issued at fair value.
recognised as an asset in the balance sheet when it is probable Dilutive potential equity shares are deemed converted as of the
that the future economic benefit associated with it will flow to beginning of the year, unless they have been issued at a later
the Company and the asset can be measured reliably. date. The number of shares and potentially dilutive equity shares
Substantial portion of the profits of the Company are exempted are adjusted for stock splits and bonus shares, as appropriate.
from income tax, being profits from undertakings situated at 2.14 Provisions and contingent liabilities
Software Technology Parks. Under the tax holiday, the Company The Group creates a provision when there is present obligation
can utilise exemption of profits from income taxes for a period of as a result of a past event that probably requires an outflow of
ten consecutive years. The Company has opted for this exemption resources and a reliable estimate can be made of the amount of
and these exemptions expire on various dates between years 2005 the obligation. A disclosure for a contingent liability is made
and 2011. The Company also benefits from tax holidays for the when there is a possible obligation or a present obligation that
export of IT services from Special Economic Zone, ('SEZ') in India. may, but probably will not, require an outflow of resources.
For units started in an SEZ, the profits of the unit are eligible for When there is a possible obligation or a present obligation in
100% tax holiday for first 5 years, and then 50% tax holiday for respect of which the likelihood of outflow of resources is remote,
the next 5 years on fulfilment of certain conditions. This unit will no provision or disclosure is made.
enjoy the above tax holiday from the time they start operations Provisions are reviewed at each balance sheet date and adjusted
and their sun set clause. In 2008, the Company started such a unit to reflect the current best estimate. If it is no longer probable
in the Noida Special Economic Zone. that an outflow of resources would be required to settle the
In these regard, the Company recognises deferred taxes in respect obligation, the provision is reversed.
of those originating timing differences, which reverse after the tax Contingent assets are not recognised in the financial statements.
holiday year resulting in tax consequences. Timing differences, However, contingent assets are assessed continually and if it is
which originate and reverse within the tax holiday year do not virtually certain that an inflow of economic benefits will arise, the
result in tax consequence and therefore no deferred taxes are asset and related income are recognised in the period in which
recognised in respect of the same. For this purpose, the timing the change occurs.
differences, which originate first are considered to reverse first.
2.15 Employee stock options
2.13 Earnings per share The company determines the compensation cost based on
The basic earnings per share is computed by dividing the net intrinsic value method. The Stock based compensation expense is
profit attributable to the equity shareholders for the period by recognised over the vesting term of each separately vesting
the weighted average number of equity shares outstanding portion of the award.
during the year. Diluted earnings per share is computed using

3 Share capital
2009 2008
Authorised
250,000,000 (2008: 250,000,000) equity shares of Rs. 2 each 500,000 500,000
Issued, subscribed and paid - up
129,126,032 (2008: 128,105,007) equity shares of Rs. 2 each fully paid 258,252 256,210
258,252 256,210

1) Of the above, 14,500,000 equity shares of Rs. 2 each were Companies Act, 1956, Patni bought back 1,650,679 equity
allotted as fully paid bonus shares in March 1995 by shares by utilising the share premium account. In this
capitalisation of general reserve aggregating Rs. 29,000. regard, an amount equivalent to the nominal value of the
2) In June 2001, Patni's Board of Directors approved a sub share capital bought back by the Company aggregating Rs.
division of existing equity shares of Rs. 10 each into 5 equity 3,301, has been transferred from general reserve to capital
shares of Rs. 2 each. redemption reserve.
3) The above also includes 46,867,500 equity shares of Rs. 2 5) In August 2003, the Company allotted 37,140,283 equity
each allotted as fully paid bonus shares in August 2001 by shares of Rs. 2 each as fully paid bonus shares by
capitalisation of share premium aggregating Rs. 93,735. capitalisation of share premium aggregating Rs. 74,281.
4) In December 2002, in pursuance of section 77A of the 6) In February 2004, Patni made an initial public offering ('IPO')

100 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

3 Share capital (Contd.)
of its equity shares in India comprising fresh issue of 1998 (“Buy Back Regulations”), for which necessary public
13,415,200 shares and sale of 5,324,000 equity shares by announcements were made on 2 April 2008.
the existing shareholders. In this regard, equity shares of 9) During 2008, the Company repurchased a total of
Rs. 2 each were issued at a premium of Rs. 228 aggregating 10,957,082 equity shares through the Bombay Stock
Rs. 3,085,496. Exchange and the National Stock Exchange for an aggregate
7) In December 2005, Patni issued 6,156,250 American consideration of Rs. 2,370,000 being 100% of the amount
Depository Shares ( 'ADSs' ) representing 12,312,500 equity authorised for buy back. Subsequently, the Company
shares of Rs. 2 each fully paid-up at a price of US$ 20.34 per extinguished such equity shares as per the requirements of
ADS for a gross proceeds of Rs. 5,739,262. Each ADS Section 77A of the Companies Act, 1956. In this regard an
represents two equity shares of Rs. 2 each fully paid-up. amount equivalent to the nominal value of the share capital
8) In February 2008, the Board of Directors of the Company bought back by the Company aggregating Rs. 21,914, has
approved a proposal to repurchase fully paid equity shares been transferred from general reserve to capital redemption
upto 10% of the paid up capital and free reserves, at a reserve which can be utilised only for the purpose of issuing
maximum price of Rs. 325 per equity share, for an aggregate fully paid bonus shares of the Company. (Refer note 4)
amount upto Rs. 2,370,000, The buyback proposal had been 10) Amount received from employees on exercise of stock
approved in accordance with the provisions of Section 77A, options pending allotment of shares is shown as share
77AA, 77B and other applicable provisions of the Indian application money. Refer note 25 for employee stock
Companies Act, 1956 and the provisions of Securities and compensation plans.
Exchange Board of India (Buy-back of Securities) Regulations,

4 Reserves and surplus

2009 2008
Building revaluation reserve
- Balance brought forward from previous year 1,272 1,353
- Transfer to profit and loss account (81) (81)
1,191 1,272
Capital redemption reserve
- Balance brought forward from previous year 275,215 253,301
- Transfer from general reserve – 21,914
275,215 275,215
Share premium
- Balance brought forward from previous year 8,625,436 10,965,989
- Share premium received on issue of equity shares 257,215 7,533
- Transfer from stock option outstanding 13,756 –
- Share premium utilised for buyback of shares (Refer note 3) – (2,348,086)
8,896,407 8,625,436
Hedging Reserve
- Balance brought forward from previous year (1,447,666) –
- Movement during the year 1,473,673 (1,447,666)
26,007 (1,447,666)
General reserve
- Balance brought forward from previous year 2,042,196 1,674,956
- Transfer from profit and loss account 542,731 389,154
- Transfer to Capital Redemption Reserve on account of share buy back (Refer note 3) – (21,914)
2,584,927 2,042,196
Foreign currency translation reserve 304,233 544,723
Profit and loss account, balance carried forward 22,972,249 18,102,057
35,060,229 28,143,233

> 101
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

5 Secured loans
2009 2008
Lease obligation in relation to vehicles acquired under finance lease (Refer note 23). 9,447 17,548
Nature of security
Finance lease obligations are secured against the vehicles acquired on lease.

6 Fixed assets
Land Land Buildings Computer Computer Electrical Office Furniture Vehicles Intangible Total as at Total as at
(Freehold) (Leasehold) and and other software installations equipments and Assets 31 December 31 December
leasehold service fixtures 2009 2008
improvements equipments
Gross block
As at 1 January 2009 171 674,377 3,138,834 2,481,141 1,391,160 835,305 1,023,153 936,012 77,851 1,094,141 11,652,145 10,240,277
Additions / Adjustments * – 154,457 916,276 143,662 354,797 95,590 98,491 121,143 13,745 (41,786) 1,856,375 1,744,453
Deletions – 43 10,376 159,934 98,248 12,250 51,531 22,869 26,188 – 381,439 332,585
As at 31 December 2009 171 828,791 4,044,734 2,464,869 1,647,709 918,645 1,070,113 1,034,286 65,408 1,052,355 13,127,081 11,652,145
Accumulated depreciation
As at 1 January 2009 – 25,730 390,721 1,980,828 1,144,665 293,650 596,694 511,340 49,604 175,189 5,168,419 4,099,918
Charge for the year – (1,020) 130,210 326,834 233,033 107,993 158,280 99,141 12,343 354,092 1,420,905 1,141,533
Deletions / Adjustments* – (4) (8,316) (170,213) (101,367) (7,939) (49,430) (18,869) (23,855) (14,636) (394,628) (73,032)
As at 31 December 2009 – 24,706 512,615 2,137,449 1,276,331 393,704 705,543 591,612 38,091 514,645 6,194,696 5,168,419
Net block as at
31 December 2009 171 804,085 3,532,119 327,420 371,378 524,941 364,570 442,674 27,317 537,710 6,932,385 6,483,726
Net block as at
31 December 2008 171 648,647 2,748,113 500,313 246,495 541,655 426,459 424,672 28,247 918,952 6,483,726
Notes:
1. Gross block of vehicles as of 31 December 2009 includes assets acquired on lease, refer note 23.
* Above additions to gross block and deletions in accumulated depreciation include exchange fluctuation adjustments amounting t o Rs.
70,812 (2008: Rs. (311,997) and Rs. 41,630 (2008: Rs. (155,436)

7 Investments
2009 2008
Long term (Unquoted, at cost)
Non-trade
Investment in Shares
Nil shares (2008: 3,649,636) of Series B-3 Preferred stock of Visage Mobile Inc. – 36,563
Less : Provision for diminution in value of investment – (34,431)
Total – 2,132
Others
Investment
NABARD Term Deposit 10% 138,006 –
12.75 percent Prakausali Investments NCD 250,000 –
Nil units (2008 : 13,500) in NABARD Bonds – 135,000
388,006 135,000
Non-trade
Investment in Mutual Funds
20,000,000 units (2008: Nil) of Kotak Fixed Maturity Plan 13Months Series 5 - Growth 200,000
15,000,000 units (2008: Nil) of IDFC - Fixed Maturity Plan-Thirteen Months Series 1 - Plan B Growth 150,000
7,144,745 units (2008: 7,144,745) of HDFC Cash Management Fund - Saving Plan - Growth 100,000 100,000
3,718,503 units (2008: 3,718,503) of Birla Sun Life Cash Plus-Institutional Premium Plan (Growth) 39,624 39,624
Nil units (2008: 35,000,000) of Kotak Fixed Maturity Plan 15months Series 4 Institutional Growth – 350,000
Nil units (2008: 25,000,000) of DSPML Fixed Maturity Plan
12 1/2 Months Series 1 Institutional Growth – 250,000
Nil units (2008: 24,550,000) of G567 IDFC Fixed Maturity Plan Yearly Series 20 - Plan B - Growth – 245,500
Nil units (2008: 20,000,000) of DWS Fixed Term Fund -Series 47 - Institutional Growth – 200,000

102 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
Nil units (2008: 20,000,000) of DSP BlackRock Fixed Maturity Plan - 13Months - Series 1
- Institutional Plan - Growth – 200,000
Nil units (2008: 20,000,000) of Reliance Fixed Horizon Fund VII - Series 4 - Institutional growth – 200,000
Nil units (2008: 15,000,000) of Lotus India Fixed Maturity Plan - 15 Months Series II
Institutional Growth – 150,000
Nil units (2008: 13,000,000) of Templeton Fixed Horizon Fund Series 7- Plan D- Institutional - Growth – 130,000
Nil units (2008: 10,002,193) of B895IG Birla Fixed Term Plan-Institutional - Series AK - Growth – 100,022
Nil units (2008: 10,000,000) of ABN Amro Fixed Term Plan Series 10 Plan E
Institutional Growth 29719/83 – 100,000
Nil units (2008: 10,000,000) of B897IG Birla Fixed Term Plan-Institutional - SERIES AM- Growth – 100,000
Nil units (2008: 10,000,000) of DSP BlackRock Fixed Maturity Plan - 15Months - Series 2
- Institutional Plan - Growth – 100,000
Nil units (2008: 10,000,000) of DWS Fixed Term Fund -Series 46 - Institutional Growth – 100,000
Nil units (2008: 10,000,000) of G551 Standard Chartered Fixed Maturity Plan yearly Series 17
plan B Growth – 100,000
Nil units (2008: 10,000,000) of JM Fixed Maturity Plan Series VII-15Months- Plan 1
Growth plan (286) 7021966294 – 100,000
Nil units (2008: 10,000,000) of JM Fixed Maturity Fund Series XI-13 Months Plan 1
Institutional Growth Plan 320 – 100,000
Nil units (2008: 10,000,000) of Kotak Fixed Maturity Plan 14 Months Series 4
Institutional-Growth Option – 100,000
Nil units (2008: 10,000,000) of ICICI Prudential Fixed Maturity Plan Series 43-13 Months
Plan D Institutional Growth – 100,000
Nil units (2008: 10,000,000) of Templeton Fixed Horizon Fund Series 7- Plan C- Institutional - Growth – 100,000
Nil units (2008: 10,000,000) of B882G Birla Fixed Term Plan - Institutional - Series AE - Growth – 100,000
Nil units (2008: 9,000,000) of G561 Standard Chartered Fixed Maturity Plan yearly
Series 19 plan B Growth – 90,000
Nil units (2008: 8,400,000) of Kotak Fixed Maturity Plan 13 Months Series 3
Institutional-Growth Option – 84,000
Nil units (2008: 8,000,000) of Reliance Fixed Horizon Fund VII - Series 1 - Institutional growth – 80,000
Nil units (2008: 7,000,000) of Lotus India Fixed Maturity Plan - 375 Days Series VII
- Institutional Growth – 70,000
Nil units (2008: 7,000,000) of 1140 ICICI Prudential Fixed Maturity Plan Series 41 -
Fourteen Months Plan Institutional Cumulative – 70,000
Nil units (2008: 6,000,000) of Lotus India Fixed Maturity Plan - 14 Months Series III
- Institutional Growth – 60,000
Nil units (2008: 5,000,000) of Kotak Fixed Maturity Plan 14 Months Series 3
Institutional-Growth Option – 50,000
Nil units (2008: 5,000,000) of Lotus India Fixed Maturity Plan - 13 Months Series IV
- Institutional Growth – 50,000
Nil units (2008: 5,000,000) of P1157 ICICI Prudential Fixed Maturity Plan Series 43 -
Thirteen Months Plan B Institutional Growth – 50,000
Nil units (2008: 5,000,000) of Tata Fixed Investment Plan - 1 Scheme A - Institutional Plan - Growth – 50,000
Nil units (2008: 14,190,973) of H16 - Oisid Hsbc Cash Fund - Institutional Plus - Growth – 150,000
Total 489,624 3,869,146
Current (Unquoted, at lower of cost or fair value)
Non-trade
Investment in Mutual Funds
278,953,675 units (2008: Nil) of G98 IDFC Money Manager Fund - Treasury Plan -
Super Institutional Plan C - Regular Dividend 2,789,823 –
180,835,202 units (2008: Nil) of DWS Ultra Short Term Fund - Institutional Dividend 1,809,529 –

> 103
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
124,066,657 units (2008: Nil) of HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 1,243,102 –
119,362,231 units (2008: Nil) of Birla Sun Life Savings Fund-Institutional Plan- Weekly Dividend 1,194,029 –
8,612,915 units (2008: Nil) of I526 ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 908,070 –
89,455,239 units (2008: Nil) of Kotak Floater Long-Term-Weekly Dividend 901,544 –
65,235,287 units (2008: Nil) of Religare Ultra Short Term Fund - Institutional - Daily Dividend 653,377 –
33,108,810 units (2008: Nil) of Kotak Floater Long-Term-Weekly Dividend 333,705 –
2,987,967 units (2008: Nil) of I526 ICICI Prudential Flexible Income Plan Premium - Weekly Dividend 315,024 –
2,103,537 units (2008: Nil) of I542 ICICI Prudential Floating Rate Plan D - Daily Dividend 210,447 –
18,914,676 units (2008: Nil) of DWS Ultra Short Term Fund - Regular Monthly Dividend Plan 200,000 –
17,193,229 units (2008: Nil) of HSBC Floating Rate - Long Term Plan -
Institutional Option - Weekly Dividend 193,141 –
17,215,204 units (2008: Nil) of G98 IDFC Money Manager Fund - Treasury Plan -
Super Institutional Plan C - Regular Dividend 172,152 –
15,016,114 units (2008: Nil) of HDFC Cash Management Fund Treasury Advantage -
Wholesale Plan Weekly Dividend Option 150,417 –
7,747,789 units (2008: Nil) of Templeton India ultra short bond fund super Institutional plan
Daily Dividend Reinvestment 3109903669658 77,568 –
571,327 units (2008: Nil) of I564 ICICI Prudential Institutional Liquid Plan - Super Institutional
Daily Dividend 57,147 –
96,327,280 units (2008: 53,583,436) of Reliance Medium Term Fund - Weekly Dividend Plan 1,647,057 916,151
101,754 units (2008: 679,425) of TLSD01 TATA Liquid Super High Investment Fund -
Daily Dividend 441363/58 113,407 757,232
61,309,771 units (2008: 8,779,708) of B85DD Birla Sun Life Short Term Fund -
Institutional Daily Dividend 613,435 87,845
1,632,230 units (2008: 5,261,129) of Birla Sun Life Liquid Plus - Institutional -
Weekly Dividend 1013038717 16,338 52,665
4,745,712 units (2008: 30,537,286) of JM Money Manager Fund-Super Plus Plan-
Weekly Dividend-7021966294 48,644 310,675
60,564,419 units (2008: 479,266) of ABN Amro Money Plus Institutional-
Weekly Dividend in 29719 folio 605,783 4,793
20,747,240 units (2008: 15,797,760) of Tata Floater Fund-Weekly Dividend 2108400/73 209,160 159,266
146,135,601 units (2008: 43,168,290) of Tata Floater Fund-Weekly Dividend 441363/58 1,473,504 435,309
Nil units (2008: 67,954,590) of B503DD Birla Sun Life Cash Plus - Institutional Prem -
Daily Dividend -Reinvestment – 680,872
Nil units (2008: 63,009,161) of 32ISD ICICI Prudential Institutional Liquid Plan Super
Institutional Daily Dividend Reinvest Dividend – 630,123
Nil units (2008: 41,693,161) of Reliance Liquidity Fund -Daily Dividend Reinvestment Option – 417,061
Nil units (2008: 29,977,116) of Pru ICICI Floating Rate Fund Plan D-Dividend Daily – 299,834
Nil units (2008: 18,903,846) of GCDB IDFC Cash Fund-Institutional Plan B -Daily Dividend 21349/70 – 200,033
Nil units (2008: 16,020,865) of Kotak Quarterly Interval Plan Series 6 Dividend – 160,211
Nil units (2008: 14,202,082) of Kotak Flexi Debt Scheme Institutional - Weekly Dividend – 142,571
Nil units (2008: 12,500,000) of P1363 ICICI Prudential Interval Fund IV
Quarterly Interval Plan C Institutional Dividend 2350363/35 – 125,000
Nil units (2008: 10,724,975) of Kotak Quarterly Interval Plan Series 3 Dividend 281827/68 – 107,338
Nil units (2008: 10,349,812) of GFBW IDFC Liquid Plus Fund - Treasury Plan -
Institutional Plan B Weekly Dividend 21349/70 – 104,499
Nil units (2008: 10,090,682) of Kotak Quarterly Interval Plan Series 6 Dividend 281827/68 – 100,907
Nil units (2008: 9,852,753) of Kotak Quarterly Interval Plan Series 3 Dividend – 98,542
Nil units (2008: 5,441,733) of Templeton India ultra short bond fund
super institutional plan Daily Dividend – 54,519

104 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

7 Investments (Contd.)
2009 2008
Nil units (2008: 5,101,957) of GFBW IDFC Liquid Plus Fund - Treasury Plan -
Institutional Plan B Weekly Dividend – 51,513
Nil units (2008: 5,034,502) of DWS liquid plus fund - institutional weekly dividend 2101581702 – 50,751
Nil units (2008: 2,219,580) of DWS liquid plus fund - institutional weekly dividend - DB253 – 22,295
Nil units (2008: 4,176) of DSPML Liquid Plus-Institutional Premium-Weekly Dividend-88136/14 – 4,180
Nil units (2008: 16,948,854) of ABN Amro Money Plus Institutional-Weekly Dividend in 275269/51 – 169,497
Nil units (2008: 15,263,928) of JM Money Manager Fund -Super Plus Plan-
Weekly Dividend-7023145875 – 155,569
Nil units (2008: 32,330,373) of Prudential Flexible Income Plan Dividend-Weekly-2582230 – 341,122
Nil units (2008: 35,477,058) of Prudential Flexible Income Plan Dividend-Weekly-2350363 – 374,113
Nil units (2008: 30,393,581) of Birla Sun Life Liquid Plus - Institutional - Weekly Dividend – 304,394
Nil units (2008: 7,088,942) IDFC Cash Fund - Investment Plan B Weekly Dividend 75,012
7,675,678 units (2008: 7,828,179) TATA Floater Fund - Weekly Dividend 77,383 78,920
539,844 units (2008: 6,733,461) ICICI Prudential Flexible Income Plan Weekly Dividend 56,916 71,008
6,461,527 units (2008: 5,900,366) Birla Sunlife Liquid Plus Institutional Weekly Dividend 64,673 59,089
3,702,211 units (2008: 3,906,360) Reliance Medium Term Fund - Weekly Dividend 63,327 66,879
7,764,598 units (2008: Nil) IDFC Money Manager Fund - Treasury Plan -
Super Institutional Plan C - Regular Dividend 77,645
6,913,474 units (2008: Nil) HDFC Cash Management Fund - Treasury Advantage Plan -
Wholesale Weekly Dividend 69,280
639,925 units (2008: Nil) ICICI Prudential Institutional Liquid Plan-Super Institutional Daily Dividend 64,006
Total 16,409,633 7,669,788
Non-trade
Investment in Global Treasury Funds
Royal Bank of Scotland - Sterling Money Fund – 237
Royal Bank of Scotland -US dollar Money Fund – 36
Royal Bank of Scotland -EUR Money Fund – 16
Total – 289
Others
Investment in others
5000 units (2008: 1000) of Canara Bank Certificates of Deposit 465,181 95,482
Total 465,181 95,482
Grand total 17,752,444 11,771,837
Less: Provision for decline in the fair value of investments (501) (503)
Aggregate value of unquoted investments 17,751,943 11,771,334

8 Sundry debtors (Unsecured)

2009 2008
Debts outstanding for a period exceeding six months
- considered good 14,282 257,871
- considered doubtful 66,905 142,479
81,187 400,350
Other debts
- considered good 5,075,452 5,193,049
- considered doubtful 67,410 –
5,224,049 5,593,399
Less: Provision for doubtful debts 134,315 142,479
5,089,734 5,450,920

> 105
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

9 Cash and bank balances
2009 2008
Cash on hand 5,412 52,539
Balances with scheduled banks
- in current accounts 557,751 481,046
- in deposit account 475 50,000
Balances with other banks
- in current accounts 2,388,984 2,348,110
- in deposit account – 55
2,952,622 2,931,750
10 Loans and advances (Unsecured)
2009 2008
Advances recoverable in cash or in kind or for value to be received 380,362 423,353
Security deposits 290,489 314,810
Loan to employees 40,052 43,799
MAT Credit entitlement (Refer note 17b) 1,071,034 631,899
Deposit with tax authorities 254,207 –
Advance Income Taxes 436,209 585,776
Derivative Assets 97,548 3,677
Others 11,268 21,604
2,581,169 2,024,918
Less: Provision for doubtful loans and advances 19,794 18,410
2,561,375 2,006,508
11 Current liabilities
2009 2008
Sundry creditors* 282,949 435,741
Billings in excess of cost and estimated earnings 265,993 292,519
Advance from customers 54,600 65,124
Unclaimed dividend** 770 476
Derivative liabilities 343,374 1,873,475
Other liabilities 3,702,680 3,660,504
4,650,366 6,327,839
* Sundry creditors include Rs. 13,628 (2008 Rs. Nil) being overdrawn bank balances as per books consequent to issue of cheques at the year
end though the banks have positive balances as on that date.
** There is no amount due and outstanding to be credited to Investor Education and Protection Fund.
12 Provisions
2009 2008
Provision for taxation 1,302,269 1,784,684
Provision for retirement benefits 1,210,315 1,378,969
Dividend on equity shares 387,378 384,315
Dividend tax 65,835 65,314
2,965,797 3,613,282

106 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

13 Other income
2009 2008
Dividend on non-trade investments 503,388 505,963
Profit on sale of non-trade investments, net 470,185 394,050
Interest from:
- Loan to employees 254 846
- Bank deposits 17,589 12,297
- Others (Refer note 27) 152,144 325,588
Interest from securities 3,246 10,513
Miscellaneous income 147,410 39,164
1,294,216 1,288,421

14 Personnel costs
2009 2008
Salaries, bonus and allowances, including overseas employee expenses 17,637,896 17,042,994
Contribution to provident and other funds 393,686 403,285
Staff welfares 214,917 252,596
Pension, gratuity and leave encashment costs 110,789 629,783
18,357,288 18,328,658

15 Selling, general and administration costs

2009 2008
Outsourced service charges 1,772,177 2,499,653
Travel and conveyance 1,158,502 1,354,948
Legal and professional fees 455,403 467,873
Postage and communication 579,677 584,577
Rent 622,188 642,856
Foreign exchange loss, net 458,154 807,253
Electricity 326,302 316,331
Rates and taxes 89,576 77,357
Software consumables 16,366 23,453
Advertisement and publicity 137,715 178,565
Insurance 114,592 119,183
Recruitment charges 124,726 162,555
Repairs and maintenance
- computers 136,196 86,939
- building 40,273 69,254
- others 72,478 80,926
Printing and stationery 30,813 34,595
Provision for doubtful debts and advances 105,450 76,682
Training fees 41,961 62,485
Commission 28,736 28,134
Subscription, registration and license fee 36,015 37,554
Auditors’ remuneration (Refer note below) 58,517 73,343
Loss /(Profit) on sale of fixed assets, net 11,415 (15,027)
Miscellaneous expenses 495,792 358,039
6,913,024 8,127,528
Note:
Auditors’ remuneration includes remuneration of subsidiary companies’ auditors.

> 107
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

16 Interest costs
2009 2008
Interest on finance lease obligations 866 1,147
Interest on overdraft from banks 39 274
Interest on tax assessments (Refer note 27) 67,441 72,710
Interest on others 8,854 4,828
77,200 78,959

17 Taxes
2009 2008
a) Provision for tax expense consists of the following:
Current taxes
- Indian 682,004 453,764
- Foreign (87,814) 273,508
594,190 727,272
Deferred tax expense / (credit)
- Indian 29,457 (64,652)
- Foreign (79,155) 40,094
(49,698) (24,558)
544,492 702,714
The significant components of deferred tax asset and liability consists of the following:
Provision for retirement benefits 368,271 450,160
Provision for bad and doubtful debts 45,972 28,155
Deferred revenue, net 23,575 8,965
Intangible Assets 124,217 20,053
Unbilled revenue 2,747 5,920
Accrued expenses 229,863 221,179
Carry forward loss 24,607 137,621
Unrealized loss on derivatives 103,015 107,544
Employee stock compensation costs 24,895 –
Depreciation (63,416) (54,813)
Others 9,588 20,457
Total deferred tax asset, net 893,334 945,241
US branch profit taxes (84,180) (171,479)
Others 17,591 37,733
Total deferred tax liability, net (66,589) (133,746)

b) Provision for Income Tax has been computed on the basis of Minimum Alternate Tax (MAT) in accordance with Sec 115JB of the In come
Tax Act, 1961. Considering the future profitability and taxable positions in the subsequent years, the company has recognised "MAT credit
entitlement" of Rs. 439,135 (2008 : Rs. 347,772) as an asset by crediting to the Profit and loss account an equivalent amount nd
a included
under "Loans and Advances" (Note 10) in accordance with the guidance note on "Accounting for credit available in respect of Min imum
Alternate Tax under Income Tax Act, 1961" issued by the ICAI.

18 Business acquisitions
Acquisition of business and assets of Logan-Orviss International Associates BV (‘LOI’)
On 2 July 2007, the Company acquired business and assets of LOI, a European telecommunications consulting services company. The Company
believes that through this acquisition it will strengthen its presence in communication and media practice through consultancy services on IT
initiatives. The purchase price of Rs. 349,099 (including direct expenses of Rs. 34,419) was paid in cash.

108 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

The purchase price has been allocated to the acquired assets as per incentive payments are linked to continuing employment, the
management's estimates and independent valuation of fair values payments under the plan are recognised as compensation for post
as summarised below: acquisition services. Based on the assessment of the revenue and
Intangible assets margin targets achieved till the year ended 31 July 2008, and 31
- Customer contracts and non July 2009, the management has concluded that no compensation
contractual customer relationships 55,625 cost is required to be accrued for these employees. Further based
- Intellectual property rights 32,075 87,700 on the assessment for the revenue and margin targets expected to
Goodwill 261,399 be achieved for the year ending 31 July 2010 the management has
Total purchase price 349,099 concluded that no compensation cost is required to be accrued for
these employees for the year ended 31 December 2009.
Goodwill generated from the above acquisition was allocated to
The purchase price, net of cash acquired of Rs. 115,770 has been
"Communications, Media and Utilities" segment.
allocated to the acquired assets and assumed liabilities based on
Further, as a part of the business acquisition, the Company management’s estimates as summarised below:
initiated an incentive plan linked to revenues for certain specific
Net current assets 102,953
employees. Management estimates that incentive payments
Deferred tax asset 37,478
under this plan will not exceed Rs. 608,482 till June 2010. Since,
Property, plant and equipment 3,442
the incentive payments are linked to continuing employment, the
Goodwill 378,699
payments under the plan are recognised as compensation costs
Total purchase price 522,572
for post acquisition services. Based on the assessment of the
revenue targets achieved for the year ended 30 June 2008, and The aggregate goodwill recorded in these consolidated financial
30 June 2009 an amount of Rs. 5,448 and Rs. 5,760 respectively statements comprise the following:
has been accrued as compensation cost for these employees. 2009 2008
Further, based on the assessment of revenue targets expected to Goodwill arising on acquisition of:
be achieved for the year ending 30 June 2010, an additional - In Patni USA 1,263,767 1,263,767
amount of Rs. 1,931 has been recorded as selling, general and - In TRI 135,174 135,174
administrative expenses for these employees for the year ended - In Patni Telecom Solutions Inc 2,557,981 2,557,981
31 December 2009. - In Patni Life Sciences Inc 378,699 378,699
Acquisition of Taratec - In LOI 261,399 261,399
On 23 July 2007, Patni USA acquired 100% equity interest in Effect of foreign currency translation 168,285 310,324
Taratec Development Corporation (subsequently named as Patni Closing balances 4,765,305 4,907,344
Life Sciences Inc.), which is a leading consulting company in the 19 Intellectual Property Rights
life sciences industry providing integrated business, information During the year ended 31 December 2007, Patni has, through its
technology, and regulatory compliance products and services. wholly owned subsidiary, Patni USA, acquired from one of its
The primary purpose for the acquisition was to enhance Patni’s major customer, the worldwide rights for a software Proprietary
market specific services and provide additional capability to Intellectual Property Rights (“IPR”) that enables communication
support the growing and diverse requirements of the life sciences service providers to offer customer management, retail point-of-
market, from pharmacovigilance to demand-driven supply chains. sale and billing services for a variety of products and services. Cost
The purchase price of Rs. 638,342 (including direct acquisition of acquisition of the IPR amounting to Rs. 811,485 has been
related expenses of Rs. 17,331), was paid in cash on 23 July 2007. capitalised as an intangible asset and is being amortised over a
period of ten years. The Group intends to use this intellectual
The terms of the purchase also provide for payment of contingent
property for the purposes of software licensing, provision of
consideration to all the selling shareholders, payable over a period
reusable IP-led IT services, managed services and provision of
of three years, and calculated based on achievement of specified
hosted or software-as-a-service solutions. A royalty of 5% is
revenue and margin targets. The contingent consideration is
payable to the seller on such sales.
payable in cash and cannot exceed Rs. 614,064 and accordingly,
Patni USA will record the contingent payments, other than Due to adverse market conditions, during the year ended 31
payments to certain employees under the incentive plan December 2009 the Company reviewed the recoverability of the
mentioned below, as goodwill in the periods in which the carrying amount of the IPR. Based on management estimate, the
contingency is resolved. expected discounted cashflows from the use of this IPR is lower
than the carrying amount and accordingly, an impairment charge
Further, as a part of the acquisition, the Company initiated an
of Rs. 237,562 for the year ended 31 December 2009 has been
incentive plan linked to revenues and margins, for certain specific
recorded and included under depreciation in the consolidated
employees of Taratec and Patni. The incentive payments under this
profit and loss account. The new cost basis for this IPR as of 31
plan will not exceed Rs. 162,820 through June 2010. Since, the
December 2009 is Rs. 517,614.

> 109
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

20 Segmental information information disclosures) has been merged with the
The Group’s operations relate to providing IT services and manufacturing industry practice (now renamed as
solutions, delivered to customers operating in various industry Manufacturing, Retail and Distribution). This integration of
segments. Accordingly, revenues represented along industry industry practices is mainly due to similar service offerings, as
classes comprise the principal basis of segmental information set both require large ERP (Enterprise Resource Planning)
out in these consolidated financial statements. Secondary implementation with significant work towards supply chain
segmental reporting is performed on the basis of the management. Further, energy and utilities segment (previously
geographical location of the customers. The accounting policies included under "Others" in the Company's segment information
consistently used in the preparation of the consolidated financial disclosures) has been merged with the Communications, Media
statements are also consistently applied to individual segment and Entertainment industry practice (now renamed as
information. Communications, Media and Utilities) as the BSS (Business
Industry segments of the Company comprise financial services, Support Systems) platform is commonly used in case of these
insurance services, manufacturing, retail and distribution industry practices.
companies, communications, media and utilities, and technology Patni’s geographic segmentation is based on location of
services (comprising independent software vendors and product customers and comprises United States of America (‘USA’),
engineering). The Company evaluates segment performance and Europe, Japan, India and Others. Revenue in relation to
allocates resources based on revenue growth. Revenue in relation geographic segments is categorised based on the location of the
to segments is categorised based on items that are individually specific customer entity for which services are performed
identifiable to that segment. Costs are not specifically allocable to irrespective of the customer entity that is billed for the services
individual segment as the underlying resources and services are and whether the services are delivered onsite or offshore.
used interchangeably. Property, plant and equipment used in the Categorisation of customer related assets and liabilities in relation
Company’s business or liabilities contracted have not been to geographic segments is based on the location of the specific
identified to any of the reportable segments, as the property, customer entity which is billed for the services.
plant and equipment and services are used interchangeably Substantial portion of Patni's long lived assets are located in India.
between segments.
The accounting policies consistently used in the preparation of the
From 1 January 2009 retail, logistics and transportation segment consolidated financial statements are also consistently applied to
(previously included under "Others" in the Company's segment individual segment information.There are no inter-segment sales.

Business segments
As at 31 December 2009 and for the year then ended
Particulars Financial Insurance Manufacturing, Communication, Product Total
services Retail and Media & Engineering
Distribution Utilities
Sales and service income 4,043,665 9,413,767 9,070,722 4,217,457 4,715,846 31,461,457
Sundry debtors 626,967 1,173,380 1,847,468 792,433 649,486 5,089,734
Unbilled revenue 104,693 119,923 324,488 252,272 116,808 918,184
Billings in excess of cost and
estimated earnings (12,279) (14,006) (114,778) (46,491) (78,439) (265,993)
Advance from customers (15,242) (2,579) (21,550) (11,486) (3,743) (54,600)

As at 31 December 2008 and for the year then ended

Particulars Financial Insurance Manufacturing, Communication, Product Total

services Retail and Media & Engineering
Distribution Utilities
Sales and service income 4,011,033 7,747,416 8,886,675 5,598,217 4,929,341 31,172,682
Sundry debtors 719,024 1,238,880 1,612,932 1,104,592 775,492 5,450,920
Unbilled revenue 133,291 105,422 396,200 638,029 221,904 1,494,846
Billings in excess of cost and
estimated earnings (50,884) (10,919) (98,986) (49,179) (82,551) (292,519)
Advance from customers (4,175) (2,453) (22,220) (2,866) (33,410) (65,124)

110 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

Geographic segments
As at 31 December 2009 and for the year then ended
Particulars USA Europe Japan India Others Total
Sales and service income 24,851,121 3,995,583 1,103,689 326,451 1,184,613 31,461,457
Sundry debtors 4,146,937 664,634 88,299 72,864 117,000 5,089,734
Unbilled revenue 528,583 228,433 21,593 24,380 115,195 918,184
Billings in excess of cost and estimated earnings (133,122) (38,428) (73,903) (2,422) (18,118) (265,993)
Advance from customers (35,207) (14,945) (2,187) (568) (1,693) (54,600)

Geographic segments
As at 31 December 2008 and for the year then ended
Particulars USA Europe Japan India Others Total
Sales and service income 23,670,101 4,867,276 1,086,187 279,789 1,269,329 31,172,682
Sundry debtors 4,118,364 921,863 160,353 95,666 154,674 5,450,920
Unbilled revenue 720,222 555,158 55,804 41,841 121,821 1,494,846
Billings in excess of cost and estimated earnings (152,231) (9,110) (74,530) (2,722) (53,926) (292,519)
Advance from customers (33,500) (3,500) (24,742) (402) (2,980) (65,124)

21 Related party transactions

a) Names of related parties and nature of relationship where control exists
Sr. No. Category of related parties Names
1 Affiliates 1) PCS Technology Limited
2) Ashoka Computer Systems Private Limited
3) PCS Cullinet Private Limited
4) PCS Finance Private Limited
5) Ravi & Ashok Enterprises.
6) iSolutions Inc.
2 Key management personnel 1) Mr Narendra K Patni
2) Mr Ashok K Patni
3) Mr Gajendra K Patni
4) Mr William Grabe
5) Mr Arun Duggal
6) Mr Michael Cusumano
1
7) Mr Arun Maira
8) Mr Pradip Shah
9) Mr Ramesh Venkateswaran
2
10) Mr Louis Theodoor van den Boog
11) Mr Abhay Havaldar
3
12) Mr Brian Stones
4
13) Mr Jeya Kumar
5
14) Mr Pradeep Baijal
6
15) Mr Mrinal Sattawala
3 Parties with substantial interest 1) Members of Patni family and their relatives
2) General Atlantic Mauritius Limited ('GA')
4 Others 1) Ravindra Patni Family Trust
7
2) Mr Anirudh Patni

1. Ceased to be director with effect from 22 July 2009 20 February 2009.

2. Ceased to be executive director with effect from 20 February 5. Appointed as director with effect from 25 June 2009
2009 and now non executive director. 6. Has resigned from 31 December 2008
3. Ceased to be director with effect from 7 January 2010 7. Has resigned from Sr. vice president with effect from 15
4. Appointed as chief executive officer with effect from December 2009 .

> 111
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

b) Transactions and balances with related parties

Nature of the transaction Affiliates Key management Parties with Others

personnel substantial interest
Transactions during the year ended 31 December 2009
Remuneration – 219,301 – 20,154
Pension* – 22,763 – –
No of ESOP's granted – 1,500,000 – –
No of Restricted stock units granted – 350,000 – –
Commission – 29,345 – –
Sitting Fees – 1,420 – –
Sales & Service Income – – 20,173 –
Rent and other expenses 3,629 – – –
Dividend Paid 54,766 42,366 153,984
Deposit received back – – – –
Balances at 31 December 2009
Security deposits 1,748 – – –
Debtors – – 3,156 –
Amounts payable 2,262 – – –
Remuneration payable to directors – 119,026 – 2,120
Provision for pension benefits – 499,550 – –
Commission payable – 4,177 – –
Stock Option Outstanding – 28,079 – –
Proposed dividend 54,766 40,266 153,984 –
Transactions during the year ended 31 December 2008
Remuneration – 344,477 – 14,621
No of ESOP's granted – 96,000 – –
Commission – 33,966 – –
Sitting Fees – 940 – –
Sales & Service Income – – 19,822 –
Rent and other expenses 3,560 – – –
Deposit received back 3,000
Dividend Paid 54,766 44,863 152,031 –
Balances at 31 December 2008
Security deposits 1,748 – – –
Debtors – – 5,028 –
Amount payable 1,214 – 244 –
Remuneration payable to directors – 91,356 – 6,967
Provision for pension benefits – 482,899 – –
Commission payable – 25,866 – –
Stock Option Outstanding – 268 – –
Proposed dividend 54,766 44,863 152,031 –
* Adjustment to pension liability on account of actuarial valuations.

112 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

21 Related party transactions (Contd.)
c) Out of the above, transactions with related parties in excess of 10% of the total related party transactions are as under :
Particulars 2009 2008
Transactions during the year
i) Remuneration
Mr Narendra K Patni 82,745 140,454
Mr Ashok K Patni (1,788) –
Mr Gajendra K Patni (1,788) –
Mr Mrinal Sattawala – 87,903
Mr Anirudh Patni 20,154 14,621
Mr Brian Stones 30,674 35,276
Mr Louis Theodoor van den Boog 10,305 41,743
Mr Jeya Kumar 121,915 –
ii) No of ESOP's granted
Mr Jeya Kumar 1,500,000 –
iii) No of Restricted stock units granted
Mr Jeya Kumar 350,000 –
Mr Louis Theodoor van den Boog – 96,000
Commission
Mr Ashok K Patni 8,400 11,200
Mr Gajendra K Patni 8,325 11,100
iv) Sitting fees
Mr Arun Duggal 200 120
Mr Michael Cusumano 220 120
Mr Arun Maira – 120
Mr Pradip Shah 220 160
Mr Ramesh Venkateswaran 300 200
v) Sales & service income
General Atlantic Mauritius Limited ('GA') 20,173 19,822
vi) Dividend paid
Affiliates :
iSolutions Inc. 54,766 54,766
Parties with substantial interest :
General Atlantic Mauritius Limited ('GA') 68,742 68,742
Arihant G Patni 15,846 15,846
Vasundhara A Patni 15,000 –
Sadhna A Patni
Key Management Personnel
Mr Narendra K Patni 6,326 6,326
Mr Ashok K Patni 23,771 27,270
Mr Gajendra K Patni 12,268 11,267
vii) Rent and other expenses
Ashoka Computer Systems Private Limited 1,134 1,022
PCS Cullinet Private Limited 1,403 1,529
PCS Finance Private Limited 972 890
viii) Deposit received back
Parties with substantial interest :
S M Patni – 3,000

> 113
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

21 Related party transactions (Contd.)
c) Out of the above, transactions with related parties in excess of 10% of the total related party transactions are as under :
Particulars 2009 2008
Balance as at
ix) Security deposits paid
Affiliates :
Ashoka Computer Systems Private Limited 591 591
PCS Cullinet Private Limited 627 627
PCS Finance Private Limited 501 501
x) Debtors
Parties with substantial interest :
General Atlantic Mauritius Limited ('GA') 3,156 5,028
xi) Proposed dividend
Key management personnel
Mr Narendra K Patni 6,326 6,326
Mr Ashok K Patni 21,671 27,270
Mr Gajendra K Patni 12,268 11,267
Affiliates :
iSolutions Inc. 54,766 54,766
Parties with substantial interest :
Vasundhara A Patni 15,000 –
Arihant G Patni 14,671 15,845
General Atlantic Mauritius Limited ('GA') 68,742 68,742
xii) Amounts payable
Ashoka Computer Systems Private Limited 657 301
PCS Cullinet Private Limited 951 589
PCS Finance Private Limited 563 263
Parties with substantial interest :
General Atlantic Mauritius Limited ('GA') – 244
xiii) Remuneration payable to the directors
Mr Narendra K Patni 35,798 33,099
Mr Mrinal Sattawala – 42,649
Mr Brian Stones 29,643 13,655
Mr Jeya Kumar 53,584 –
xiv) Remuneration payable to Others
Mr Anirudh Patni 2,120 6,967
xv) Provision for pension benefits*
Mr Narendra K Patni 374,417 348,079
Mr Ashok K Patni 68,679 70,466
Mr Gajendra K Patni 56,455 64,354
xvi) Stock Option Outstanding
Mr Jeya Kumar 22,289 –
Mr Louis Theodoor van den Boog 5,791 268
xvii) Commission Payable
Mr Ashok K Patni – 11,200
Mr Gajendra K Patni – 11,100
Mr Arun Duggal 933 948
Mr Michael Cusumano 466 443
Mr Pradip Shah 700 695
Mr Pradeep Baijal 566 987
Mr Ramesh Venkateswaran 933 –
Mr Louis Theodoor van den Boog 466 –
* Adjustment to pension liability on account of actuarial valuations.

114 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

22 Earnings per share
Particulars 2009 2008
Profit for the year after taxation 5,866,142 4,380,140
Weighted average number of equity used in computing earnings per equity share.
- Basic 128,254,916 135,590,677
- Diluted 130,560,132 135,815,016
Earnings per equity share of Rs. 2 each
- Basic 45.74 32.30
- Diluted 44.93 32.25
Face value per share (Rs.) 2.00 2.00

Reconciliation of basic and diluted shares used in computing earnings per share
2009 2008
Number of shares considered as basic weighted average shares outstanding 128,254,916 135,590,677
Add: Effect of dilutive issues of stock options 2,305,216 224,339
Number of shares considered as weighted average shares and potential shares outstanding 130,560,132 135,815,016

23 Leases
Patni has acquired certain vehicles under finance lease for a non-cancelable period of four years. At the inception of the lea se, fair value of
such vehicles has been recorded as an asset with a corresponding lease rental obligation recorded under secured loans.
Fixed assets include the following amounts in relation to the above leased vehicles:

As at 31 December 2009 2008

Gross block of vehicles 27,492 43,692
Less: Accumulated depreciation 17,936 26,295
Net block 9,556 17,397

Future minimum lease payments in respect of the above assets as at 31 December 2009 are summarised below:
Minimum lease Finance charge Present value of
payments minimum lease payments
Amount due within one year from the balance sheet date 5,779 550 5,229
Amount due in the period between one year and five years 4,508 289 4,219
10,287 839 9,448

The Company has operating lease agreements, primarily for leasing office space and residential premises for its employees. Most of the lease
agreements provide for cancellation by either party with a notice period ranging from 30 days to 120 days and also contain a cl ause for
renewal of the lease agreement at the option of the company. Additionally, the Company has taken certain office premises under non-
cancelable operating lease arrangements, which are renewable at the option of the company.
The future minimum lease payments in respect of non-cancelable operating leases are summarised below:
As at 31 December 2009 2008
Amount due within one year from the balance sheet date 303,215 482,467
Amount due in the period between one year and five years 551,446 660,551
Amount due in the period above five years – 146,678
854,661 1,289,696
Patni USA has operating lease agreements, primarily for leasing office space, that expire over the next 1-6 years. These leasesgenerally require
Patni USA to pay certain executory costs such as taxes, maintenance and insurance.
Patni has operating lease agreements, primarily for leasing office and residential premises. These agreements provide for cancellation by either
party with a notice period ranging from 30 days to 120 days, after the initial lock-in period, if any. Some leases contain a cl ause for renewal
of the lease agreements. Some leases provide for annual renewal of the lease payments.
Patni Telecom and its subsidiaries have operating leases for office space, that expire over the next 1-4 years. These agreement s provide for

> 115
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

23 Leases (Contd.)
cancellation by either party with a notice period ranging from 30 days to 180 days, after the initial lock-in period, if any.
Patni UK has operating lease agreement, for leasing office space, that expire over the next 10 years.
Rent expense for all operating leases for the year ended 31 December 2009 aggregated Rs. 601,147 (2008: Rs. 640,223)

24 Contingent liabilities and capital commitments

As at 31 December 2009 2008
Estimated amount of contracts remaining to be executed on capital account and not provided for 2,584,545 2,442,808
Foreign currency forward contracts 15,064,749 14,270,832
Forward currency options 465,200 5,579,879
Bank guarantees 80,591 64,346
Letters of credit 16,985 –
Tax contingencies 2,482,297 2,482,297

Estimated amount of contracts remaining to be executed on capital account and not provided for includes cases wherein purchase orders
have been released and work has either not commenced or has been partially completed.
Foreign currency forward contracts and forward currency options represents the total notional value of such contracts outstandi ng as at
Balance sheet date.
In December 2009 the Income tax department has issued draft assessment order for assessment year (A.Y.) 2006-07 disallowing 10A
deduction of the Indian Income Tax Act, 1961 as per the earlier assessments, as well as making a Transfer Pricing Adjustment fo r our BPO
operations. The company has filed the objections against the draft order before the Dispute Resolution Panel ("DRP") newly set up under the
IT Act. Management considers these disallowances as not tenable against the Company, and, therefore, no provision for this tax contingency
has been established.
In December 2008 the Company received a Demand of approximately Rs. 458,665 for the A.Y.2003-04 including an interest demand of
Rs. 258,644 and another Demand in January 2009 of approximately Rs. 1,131,763 for the A.Y. 2005-06 including an interest demand of
approximately Rs. 421,972. These new demands concern the same issue of disallowance of tax benefits under Section 10A of the In dian
Income Tax Act, 1961 as per the earlier assessments. The Company has filed an appeal with the tax authorities and stay of deman d has been
granted till 28 February 2010 or settlement of appeal whichever is earlier. As per stay of demand order, through December 2009, the
company has paid sum of Rs. 66,000 for the A.Y.2003-04 and Rs. 170,986 for the A.Y.2005-06 as regards the matter under appeal.
Management considers these demands as not tenable against the Company and, therefore, no provision for this tax contingency has been
established.
The Tax department had earlier rejected the Company's claim under section 10A of the Act and and raised a demand of approximate ly
Rs. 630,166 for A.Y. 2004-05 and Rs. 261,703 for A.Y. 2002-03 in December 2006 and December 2007, respectively. However on appe al,
in 2008 the CIT (Appeal) had allowed the claim under section 10A of the Income Tax Act, 1961. The Indian Income tax department has
appealed against the CIT (Appeals') orders in respect of A.Y.2002-03 and 2004-05 in the tribunal. Management considers these de mands as
not tenable against the Company and, therefore, no provision for this tax contingency has been established.
Certain other income tax related legal proceedings are pending against the Company. Potential liabilities, if any, have been ad equately
provided for, and the Company does not currently estimate any incremental liability in respect of these proceedings. Additional ly, the
Company is also involved in lawsuits and claims which arise in ordinary course of business. There are no such matters pending t hat Patni
expects to be material in relation to its business.

25 Employee stock compensation plans

On 30 June 2003, Patni established the 'Patni ESOP 2003' plan ('the plan'). Under the plan, the Company is authorised to issue up to
11,142,085 equity shares to eligible employees. Employees covered by the Plan are granted an option, which may be based on serv ice and
performance criteria, to purchase shares of the Company subject to the requirements of vesting. The options vest in a graded ma nner over
four years with 25 per cent of the options vesting at the end of each year and expire at the end of 5 years from the date of ve sting. A
compensation committee constituted by the Board of directors of the Company administers the plan. The plan has been amended to enable
the Company to issue upto 2,000,000 ADR linked options (wherein one ADR linked option is equal to two equity shares) to the emp loyees
of the Company as well as its subsidiaries and hence " Patni ESOP 2003 - Revised 2006 " has come into force with effect from 21 June 2006.
In June 2009 at the Annual General Meeting the shareholders authorised the Company to issue additional 8,000,000 equity shares to eligible
employees under the "Patni ESOP 2003 - Revised 2008" plan.
The exercise price of the grant approximated the fair value of the underlying equity shares at the date of the grant, except in the case of

116 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

restricted stock units, where in the exercise price for the grants offered to employees is at face value of the share price.
Stock options*activity under the plan is as follows:

Year ended 31 December 2009

Share arising Range of Weighted
out of options exercise price average remaining
contractual life
(months)
Outstanding at the beginning of the year 525,525 145 35
2,824,076 254-338 52
2,005,226 339-493 50
350,000 112 89
596,000 2 89
Granted during the year 40,000 134 90
1,500,000 106 90
1,830,700 2 76
499,600 339-493 90
Forfeited during the year (54,800) 2 –
(40,000) 134 –
(35,145) 145 –
(251,350) 254-338 –
(345,650) 339-493 –
Exercised during the year 125,000 2 –
76,000 112 –
212,705 145 –
293,650 254-338 –
352,250 339-493 –
Outstanding at the end of the year 277,675 145 24
2,279,076 254-338 40
1,806,926 339-493 57
2,246,900 2 72
274,000 112 82
1,500,000 106 80
Exercisable at the end of the year 24,000 2 59
11,500 112 59
277,675 145 24
1,711,444 254-338 30
1,044,476 339-493 41

> 117
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

25 Employee stock compensation plans (Contd.)
Year ended 31 December 2008
Share arising Range of Weighted
out of options exercise price average remaining
contractual life
(months)
Outstanding at the beginning of the year 583,826 145 47
2,135,869 254-338 53
2,416,055 339-493 71
Granted during the year – 145 –
962,900 254-338 90
350,000 112 90
596,000 2 90
Forfeited during the year (16,051) 145 –
(274,693) 254-338 –
(410,829) 339-493 –
Exercised during the year (42,250) 145 –
Outstanding at the end of the year 525,525 145 35
2,824,076 254-338 52
2,005,226 339-493 50
350,000 112 89
596,000 2 89
Exercisable at the end of the year 525,525 145 35
1,885,276 254-338 40
1,261,219 339-493 37
* Includes stock options granted to employees of subsidiary companies

Patni uses the intrinsic value method of accounting for its employee stock options. Patni has therefore adopted the pro-forma d isclosure
provisions as required by the Guidance Note on "Accounting for Employee Share-based payments" issued by the ICAI with effect fr om 1 April
2005. Had the compensation cost been determined in a manner consistent with the fair value approach described in the aforesaid Guidance
Note, Patni's net profit and EPS as reported would have been adjusted to the pro-forma amounts indicated below:

2009 2008
Profit for the year after taxation as reported 5,866,142 4,380,140
Add Stock based employee compensation determined under the intrinsic value method 203,007 1,662
Less Stock based employee compensation determined under the fair value method 258,151 151,573
Pro-forma profit 5,810,998 4,230,229
Reported earnings per equity share of Rs. 2 each
- Basic 45.74 32.30
- Diluted 44.93 32.25
Pro-forma earnings per equity share of Rs. 2 each
- Basic 45.31 31.20
- Diluted 44.51 31.15
The stock based compensation disclosed above is with respect to all stock options granted on or after 1 April 2005.
The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following
assumptions for equity linked options.
2009 2008
Dividend yield 1.37%-1.78% 0.68%-1.09%
Weighted average dividend yield 1.53% 0.93%
Expected life 3.5-6.5 years 3.5-6.5 years
Risk free interest rates 5.94%-7.21% 7.10%-7.37%
Volatility 37.01%-44.16% 33.01%-39.45%
Weighted Average Volatility 39.42% 37.35%

118 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

25 Employee stock compensation plans (Contd.)
The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option pricing model with the following
assumptions for ADR Linked Options:
2009 2008
Dividend yield 1.18%-1.64% 0.68%
Weighted average dividend yield 1.61% 0.68%
Expected life 1.0-6.5 years 3.5-6.5 years
Risk free interest rates 0.52%-2.96% 3.04%-3.51%
Volatility 42.41%-50.79% 41.36%-44.76%
Weighted average volatility 46.65% 43%

The compensation expense for RSU's granted is accounted as per Intrinsic value method and shown under the head Personnel Cost a s stated
below:
2009 2008
Personnel Cost 203,007 1,662

On 18 August 2009, a further amendment was made to the Indian Income Tax Act, with retroactive effect from 1 April 2009, abolishing the
provisions of FBT. Thus, for any exercises of stock options by the employee on or after 1 April 2009, the shares issued, or all ocated and
transferred by the Company, are no longer subject to FBT.

26 Statement of Utilisation of ADS Funds as of 31 December 2009

No of shares Price Amount
Amount raised through ADS (6,156,250 ADSs @ $ 20.34 per ADS) 12,312,500 466 5,739,262
Share issue expenses 369,406
Net proceeds 5,369,856
Deployment :
1 Held as short term investments 1,000,893
2 Utilised for Capital expenditure for office facilities 4,248,140
3 Exchange loss 120,823
Total 5,369,856

27 Change in estimates
The US Internal Revenue Service ("IRS") completed its assessment of tax returns for the years ended 2003 and 2004 of Patni Americas Inc. and
for the years ended 31 March 2003, 2004 and 2005 of the US branch of the Company in 2008 and during the year ended 31 December
2009, completed its assessment of tax returns for the years ended 2005 and 2006 of Patni Americas Inc. Based on the completion of
assessment of these years, the Company reviewed the adequacy of the previously established tax exposure reserves with respect to these years
and re-measured the established tax positions for the latter years based on the experience gained from the tax examination and accordingly,
the following amounts have been included in the income statement for the fiscal year ended 31 December 2008 and 2009 as a chang e in
estimate:

2009 2008
Reduction of accrual for payroll taxes (1) (56,543) (107,939)
Reduction in interest expense (2) (78,831) (254,715)
Increase in Interest expense – 24,502
Reduction in other expense (3) (11,309) (42,821)
Reduction in income taxes - current (460,452) (453,749)
Increase in income taxes - deferred 54,150 164,601
(552,985) (670,121)
(1) Included on Personnel costs
(2) Included in Other Income - Interest from Others
(3) Included in Selling, general and administration costs

> 119
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

27 Change in estimates (Contd.)
The statute of limitation period applicable to tax return of the US Branch of the Company, for the year ended March 2006, expir ed on 15
December 2009 i.e. on expiry of 3 years from the date of filing, which was 15 December 2006. The company has, therefore, reversed the tax
exposure reserves for taxes and interest pertaining to the US of the Company for the year ended March 2006. Accordingly, the fo llowing
amounts have been included in the income statement for the year ended 31 December 2009:

2009
Reversal of interest expense (i) (55,816)
Decrease in income taxes -current (344,960)
Increase in income taxes -deferred 8,892
(391,884)
(i) Included in 'Other Income'
During the year the company received a favorable order from the Income Tax Appellate Tribunal allowing the set off of losses of 10A units
against business income. Based on the same the company has reversed the relevant tax provisions amounting to Rs. 114,393.

28 Significant events
The Finance Act,2009 has extended the availability of the 10-year income tax holiday by a period of one year such that the tax holiday will
be available until the earlier of fiscal year ending 31 March 2011 or 10 years after the commencement of a Company’s undertaking. The fringe
benefit tax has also been abolished.

29 Disclosure pursuant to AS-7, 'Construction Contracts' (Revised) in respect of revenue contracts for customised software devel opment
2009 2008
i) Contract Revenue recognised for the year ended 31 December 2009 3,509,183 4,101,713
ii) Aggregate amount of contract costs incurred for all contracts in progress as at year end. 2,226,148 2,069,048
iii) Recognised Profits (less recognised losses) for all contracts in progress as at year end. 1,176,485 1,169,861

30 Employee Benefit Plans

Gratuity Benefits
In accordance with the Payment of Gratuity Act, 1972, Patni provides for gratuity, a defined retirement plan covering all employees. The plan
provides a lump sum payment to vested employees at retirement or termination of employment based on the respective employee's d efined
portion of last salary and the years of employment with the company.
Patni contributes each year to a gratuity fund based upon actuarial valuations performed by an actuary. The fund is administere d by Patni
through a trust set up for the purpose. All assets of the plan are owned by the Trust and comprise of approved debt and other securities and
deposits with banks.
Amount to be recognised in Balance Sheet
2009 2008
Present Value of Funded/unfunded Obligations 313,877 296,452
Fair Value of Plan Assets (273,266) (223,137)
Net Liability 40,611 73,315
Amounts recongnised in Balance Sheet
Provision for Gratuity 40,611 73,315

Expense recognised in Statement of Profit and Loss Account

2009 2008
Current Service Cost 53,795 50,686
Interest on Defined Benefit Obligations 18,091 22,139
Expected Return on Plan Assets (15,582) (15,937)
Net Actuarial Losses / (Gains) recognised in the Year (28,480) (16,800)
Total Included in "Employee Benefit Expense" 27,824 40,088

120 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

30 Employee Benefit Plans (Contd.)
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
2009 2008
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 296,451 261,896
Current Service Cost 53,795 50,686
Interest Cost 18,091 22,139
Actuarial Losses/(Gain) (30,023) (9,897)
Benefits Paid (24,437) (28,373)
Closing Defined Benefit Obligation 313,877 296,451
Change in Fair Value of Assets
Opening Fair Value of Plan Assets 223,136 228,521
Expected Return on Plan Assets 15,582 15,937
Actuarial Gain /(Losses) (1,543) 6,903
Contributions by Employer 60,528 148
Benefits Paid (24,437) (28,373)
Closing Fair Value of Plan Assets 273,266 223,136
Expected Employer's Contribution Next Year 52,155 51,238
Plan assets have been invested in corporate bonds, mutual funds and Government of India securities.
Financial Assumptions at the Valuation Date
Discount Rate (p.a.) 6.55% 5.85%
Expected Rate of Return on Assets (p.a.) 7.50% 7.50%
Salary increase Rate (p.a.) 6.00% 8% for first
3 years and,
7% thereafter.
Composition of plan assets
2009 % 2008 %
Central Government Securities 3,042 1% 6,143 3%
Investment in Government Securities based funds 200,808 74% 164,030 73%
Public Sector / Financials Institutions / Bank bonds 69,417 25% 52,963 24%
273,267 100% 223,136 100%
Pension Benefits
Founder directors of Patni India and Executive director in employment with Patni USA are entitled to receive pension benefits upon retirement
or on termination from employment at the rate of 50% of their last drawn monthly salary. The pension is payable from the time t he eligible
director reaches the age of sixty five in respect of Founder directors of Patni India and seventy one in respect of Executive d irector in
employment with Patni USA, and is payable to the directors or the surviving spouse. The liabilities for these pension plans are actuarially
determined and periodically recognised. These plans are not funded.
Amount to be recognised in Balance Sheet
2009 2008
Present Value of Unfunded Obligations 125,133 134,821
Amounts recognised in Balance Sheet
Provision for pension 125,133 134,821
Expense recognised in Statement of Profit and Loss Account
2009 2008
Current Service Cost –
Interest on Defined Benefit Obligations 7,708 7,707
Net Actuarial Losses / (Gains) recognised in the Year (11,284) 31,394
Total Included in "Employee Benefit Expense" (3,576) 39,101

> 121
 Notes to the Consolidated Financial Statements (Contd.) for the year ended 31 December 2009

(Currency: Rs. in thousands except share data)

30 Employee Benefit Plans (Contd.)
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
2009 2008
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 134,821 101,831
Current Service Cost – –
Interest Cost 7,708 7,707
Actuarial Losses/(Gain) (11,284) 31,394
Benefits Paid (6,112) (6,111)
Closing Defined Benefit Obligation 125,133 134,821
Expected Employer's Contribution Next Year 6,112 6,111
Financial Assumptions at the Valuation Date
Discount Rate (p.a.) 6.55% 5.85%
Salary increase Rate (p.a.) 0.00% 0.00%

Pension Benefits - US Director

Executive director of the Company are entitled to receive pension benefits upon retirement or termination from employment at th e rate of
50% of their last drawn monthly salary. The pension is payable from the time the eligible director reaches the age of seventy o ne and is
payable to the director or the surviving spouse.
Amount to be recognised in Balance Sheet
2009 2008
Present Value of Unfunded Obligations 374,417 348,079
Amounts in Balance Sheet
Provision for pension 374,417 348,079

Expense recognised in Statement of Profit and Loss Account

2009 2008
Current Service Cost 9,610 7,938
Interest on Defined Benefit Obligations 16,096 12,581
Net Actuarial Losses / (Gains) recognised in the Year 632 47,990
Total Included in "Employee Benefit Expense" 26,338 68,509

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
2009 2008
Change in Defined Benefit Obligation
Opening Defined Benefit Obligation 348,079 279,570
Current Service Cost 9,610 7,938
Interest Cost 16,096 12,581
Actuarial Losses/(Gain) 632 47,990
Benefits Paid – –
Closing Defined Benefit Obligation 374,417 348,079
Financial Assumptions at the Valuation Date
Discount Rate (p.a.) 4.50% 4.50%
Salary increase Rate (p.a.) 10.00% 10.00%

31 Prior year comparatives

Previous year's figures have been appropriately reclassified to conform to the current year's presentations.

122 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED

Reconciliation of Significant Differences

between Indian GAAP and US GAAP
(Rs. in thousands)
Year ended 31 December
2009 2008
Consolidated net income as per Indian GAAP 5,866,142 4,380,140
Income taxes (31,849) 60,297
Foreign currency differences 50,870 73,061
Employee Retirement Benefits (41,856) 17,982
ESOP related Compensation Cost (47,097) (165,830)
Impairment of Intangibles 139,568
Business acquisition (90,273) (71,081)
Others (408) (2,717)
Total (21,045) (88,288)
Consolidated net income as per USGAAP 5,845,097 4,291,852

1 Income taxes of The Reference Inc, Patni Telecom Solutions Inc. (formerly Cymbal
This represents deferred tax impact of significant differences Corporation) and Patni Life Sciences Inc (formerly Taratec
between Indian GAAP and US GAAP. Development Corporation) have been recorded at fair values
assigned to them, whereas under Indian GAAP these have been
2 Foreign currency differences
recorded at respective book values. Further, under US GAAP, a
In Indian Gaap, as per the guidance under AS 30, “Financial
portion of the purchase consideration has been allocated to
Instruments : Recognition and Measurement” with regard to
intangible assets meeting the criteria for being recognized as an
foreign currency purchased options, the changes in the time value
asset apart from goodwill. These intangible assets are being
(i.e. forward premia differential) is excluded from the assessment
amortised over its useful life in proportion to the economic benefits
of effectiveness testing and taken into the profit and loss account
consumed during each reporting period. Under Indian GAAP, the
whereas under US Gaap with respect to those contracts the overall
entire difference between the purchase consideration and the book
changes in the fair value including the changes in the time value is
value of assets acquired has been recorded as goodwill, which is
considered in effectiveness testing and reported in the Statement
subject to impairment testing.
of Shareholder’s equity and other comprehensive income.
6 Impairment of Intangibles
3 Employee retirement benefits
Due to adverse market conditions, during the year ended 31
This represents difference in recording pension, gratuity, and leave
December 2009 the Company reviewed the recoverability of the
encashment costs.
carrying amount of the software proprietary intellectual property
4 ESOP related Compensation Cost rights or the IPR. In Indian Gaap as per the guidance in AS – 28
Under US GAAP, compensation cost is recognised for sharebased “Impairment of assets”, based on management estimate as the
payments using a fair value measurement method where the expected discounted cashflows from the use of this IPR was lower
estimated fair value of awards is charged to income on a than the carrying amount an impairment charge net of tax was
accelerated basis over the requisite service period, which is accounted under Indian Gaap.
generally the vesting period. Accordingly, compensation cost has
Under US Gaap as the sum of undiscounted cash flows expected
been recorded based on fair value under US GAAP while such
to result from it’s use exceeded the carrying value hence no
accounting is done based on instinsic value under Indian GAAP.
impairment charge was recognized.
5 Business acquisition
Under US GAAP, the assets and liabilities acquired on acquisition

> 123
 Management’s Discussion and Analysis of the
Consolidated Financials under US GAAP
Overview of contract, type of customer and geographic region. We manage
We are a leading Indian provider of information technology services. and market our business according to our industry and technology
We deliver a comprehensive range of IT services through globally practices.
integrated onsite and offshore delivery locations primarily in India,
We have also developed technology practices that offer research,
which we call our global delivery model. We offer our services to
design and development services for product engineering and to ISVs.
customers through industry focused practices, including insurance,
Our service lines support both our industry and technology practices.
manufacturing, retail and distribution, communications, media and
We do not, however, treat our service lines as separate components
utilities and financial services, and through technology focused
of our business for financial reporting purposes.
practices. Within these practices, our service lines include application
development, application maintenance and support, packaged Results of Operations
software implementation, infrastructure management services, The following table sets forth certain financial information as a
product engineering services, business process outsourcing and percentage of revenues, calculated from our consolidated financial
quality assurance services. statements:

Our revenues grew from US$ 450.3 million in 2005 to US$ 655.9 Year ended December 31,
million in 2009, representing a CAGR of 9.9%. Our net income grew 2007 2008 2009
from US$ 60.9 million in 2005 to US$ 119.8 million in 2009, Revenues 100% 100% 100%
representing a CAGR of 18.4%. Our total number of employees was Cost of revenues 67.9% 68.3% 64.2%
11,802 as of December 31, 2005 and 13,995 as of December 31, Gross profit 32.1% 31.7% 35.8%
2009 We are investing in new high-tech facilities, which we refer to Selling, general and
as “knowledge parks”, designed for expanding our operations and administrative expenses 17.7% 18.5% 18.9%
training our employees. As of December 31, 2009, we had 235 sales Foreign exchange (gain)/loss, net (3.5)% 2.5% 1.5%
and marketing personnel supported by dedicated industry specialists Operating income 17.9% 10.7% 15.4%
in 28 sales offices around the globe, including North America, Interest and dividend income 1.9% 1.8% 1.7%
Europe, Japan and the rest of the Asia-Pacific region. Interest expense (0.5%) (0.2)% (0.2)%

Our industry segments comprise of financial services, insurance Interest expense reversed – 0.9% 0.4%

services, manufacturing, retail and distribution companies, Gain on sale of investments, net 1% 1.3% 1.4%

communications, media and utilities and technology practice Other income (expense), net 0.3% 0.3% 0.3%

(comprising product engineering). We evaluate segment performance Income before income taxes 20.6% 14.8% 19%

and allocate resources based on revenue growth. We categorise Income taxes 3.3% 0.7% 0.7%

revenue in relation to segments based on items that are individually Net income 17.3% 14.1% 18.3%

identifiable with that segment. Costs are not specifically allocable to

individual segments as the underlying resources and services are used Year ended December 31, 2009 Compared
interchangeably. Fixed assets used in our business or liabilities to Year ended December 31, 2008
contracted have not been identified with any of the reportable Revenues
segments, as the fixed assets and services are used interchangeably Our revenues were US$ 655.9 million in 2009, representing a

between segments. decrease of 8.8% from revenues of US$ 718.9 million in 2008 which
was mainly on account of overall volume decline of 4.6 %, pricing
Our management evaluates our results of operations by examining
decline of 2.2 % and foreign exchange impact of 1.8%. Revenues
financial and operating data in a variety of categories, including our
from existing customers contributed US$616.3 million and new
industry and technology practices, onsite and offshore revenues, type
customers contributed US$ 39.6 million to our revenues. This

124 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

represented a decrease of 8.1% in revenues from existing customers was Rs. 43.39 as compared to average exchange rate of Rs. 48.33 in
and decrease of 17.6% in revenues from new customers compared to 2009 resulting in a rupee depreciation of 11.4% which had a positive
2008. Reduction in revenues from our existing operations was impact in reducing the cost of revenues in 2009 as compared to
attributable to a decrease of 1.6% in the total billed person-months 2008 as 39% of our cost of revenues is incurred in Indian rupees.
from work performed at both our offshore and onsite locations.
Gross profit
Onsite work measured in billed-person months decreased by 6.6% in
Our gross profit for 2009 was US$ 234.6 million, representing an
2009 compared to 2008, while offshore work increased 0.4% over
increase of 3.1% from US$ 227.6 million in 2008. Gross profit as a
the same period. Our active client base is at 272 as of December 31,
percentage of our revenues increased to 35.8% in 2009 from 31.7%
2009 as compared to 331 as of December 31, 2008. In addition, the
in 2008. The increase in gross profit is attributed to various factors
total number of clients that individually accounted for over US$ 1.0
including currency exchange rates, operating efficiencies in terms of
million in annual revenues continued to be 92 as of December 31,
various measures such as utilization, reduction and rationalization in
2009 and as of December 31, 2008.
operating and discretionary expenses. These measures led to the
During 2009, our revenues from T&M projects decreased by 7.3% increase in gross profit by 3.1% over 2008 despite the decline in
over revenues in 2008, while revenues from fixed price contracts revenues over 2008 by 8.8%.
increased by 12.8% over the same period. T&M projects accounted
for 59.4% of our revenues in 2009, compared to 64.0% in 2008 and Selling, general and administrative expenses
62.2% of our new business was billed on a T&M basis. During 2009, our selling, general and administrative expenses were
US$ 122.0 million, representing a decrease of 6.9% from US$ 131.1
Our client concentration, as measured by the proportion of revenue
million in 2008 and our selling, general and administrative expenses
generated from our top ten clients, increased to 49.7% in 2009 from
as a percentage of our revenues increased to 18.9% in 2009 from
45.6% in 2008. Our largest client contributed 11.9% of our revenues
18.3% in 2008.
in 2009, compared to 10.7% in 2008.
During 2009, our sales and marketing expenses were US$ 53.8
During 2009, clients in the insurance, manufacturing, retail and
million, representing an increase of 2.5% from US$ 52.5 million in
distribution, financial services and product engineering services
2008. Personnel costs increased by US$ 2.5 million due to the
industries continued to contribute a large proportion of our revenues.
addition to sales and marketing personnel mainly in Japan and
Revenues from clients in these industries contributed 29.7%, 29.0%,
Singapore region to strengthen our Asia Pacific footprint. Other
12.8% and 15% to overall revenues respectively in 2009 as compared
selling and marketing costs mainly comprising of foreign travel and
to 24.7%, 28.9%, 12.8% and 15.7% respectively in 2008. Our clients
conference expenses decreased by US$ 1.8 million.
in the communications, media and utilities industry contributed to
13.5% of our revenues in 2009 as compared to 17.9% in 2008. Our general and administrative expenses were US$ 68.2 million in
2009, representing a decrease of 13.1% from US$ 78.5 million in
During 2009, we continued to derive a significant proportion of our
2008. Personnel costs decreased in 2009 by US$ 3.6 million due to
revenues from clients located in the United States. In 2009 and 2008,
the reduction in headcount of general and administrative personnel.
we derived 78.9% and 75.9% of our revenues from clients located in
Other general and administrative charges mainly comprising of
the United States.
professional fees, recruitment cost and establishment cost decreased

Cost of revenues by US$ 6.9 million as part of operating efficiency measures as such as

Our cost of revenues was US$ 421.3 million in 2009, representing a reduction and rationalization in operating and discretionary expenses.

decrease of 14.2% from US$ 491.3 million in 2008. Cost of revenues

Foreign exchange gain/loss
represented 64.2% and 68.3% of our revenues in 2009 and 2008.
In 2009, we had a foreign exchange loss of US$ 9.7 million as
Out of the net decrease of US$ 69.9 million in cost of revenues, US$
against a loss of US$ 18.4 million in 2008. The year-end exchange
32.5 million was attributable to salary expenses and the remaining
rate in rupees per U.S dollar for 2009 was Rs. 46.4 as compared to
decrease was mainly due to a US$19.9 million decrease in
Rs. 48.58 in 2008 resulting in a 4.5% appreciation during the year -
subcontractor costs. The salary decrease is mainly on account of
end in percentage terms. The average realization rate for rupee per
reduction in headcount onsite and positive impact of rupee
US dollar for 2009 was Rs. 46.2 as against Rs. 42.3 for 2008. Also in
depreciation on offshore salaries. The average exchange rate for 2008
2008 we had a revaluation loss on tax liability amounting to US$4.0

> 125
 million as compared to gain of US$1.8 million in 2009. This was completion of IRS assessment with regard to Patni Americas Inc. for
mainly on account rupee appreciation in 2009 from Rs. 48.58 as of years 2005 and 2006, reversal of US$7.0 million on account of expiry
December 31, 2008 to Rs. 46.40 as of December 31,2009 as of statute of limitation with regard to year ended March 2006 of our
compared to rupee depreciation from Rs. 39.41 as of December 31, US branch and also included a reversal of US$2.5 million on account
2007 to Rs. 48.58 as of December 31, 2008. Our dollar-denominated of favourable order received by us from Indian Income tax Appellate
receivables continued to be hedged. Revaluation of foreign exchange Tribunal allowing a set off of section 10A losses against the taxable
exposures mainly mark-to-market of foreign exchange contracts and business income. (See “Item 5.A Operating Results -Taxes”). In 2008
revaluation of debtors result in a net foreign exchange loss. we made a provision of US$5.2 million which included a reversal of
US$8.4 million on account of completion of assessment by IRS for
Operating income
year end 2003, 2004 for Patni Americas Inc and for year ended
As a percentage of revenues, operating income increased to 15.4% in
March 2003, 2004 and 2005 of our US branch. Hence our reported
2009 from 10.7% in 2008. Our operating income was US$ 100.6
tax rate for the year 2009 was 3.8% as against 4.9% for the year
million in 2009, representing an increase of 31.4% from US$ 76.6
2008. Our normalized effective tax rate (excluding tax reversals) was
million in 2008 which is mainly due to a lesser foreign exchange loss
18.8% as compared to 14.0%. for the year 2008, which was mainly
of US$ 9.7 million in 2009 as compared to a foreign exchange loss of
due to the expiry of income tax benefit for some of our STPI units in
US$ 18.4 million in 2008 and other operating efficiency measures
India.
such as utilization, reduction and rationalization in operating and
discretionary expenses. The exchange rate between the rupee and Net income
dollar has fluctuated substantially in recent years and may continue to Our net income was US$119.8 million in 2009, representing an
do so in future. We are unable to predict the impact that future increase of 18.1% from US$ 101.4 million in 2008. As a percentage
fluctuations may have on our operating margins. of our revenues, net income increased to 18.3% in 2009 from 14.1%
in 2008. The increase in the net income is mainly due to the reasons
Other income (expense)
explained above.
Other income (expense), reflects interest and dividend income,
interest expense, interest expense reversed, net gain on sale of Liquidity and capital resources
investments and other income or expense, net. In 2009, our gain on Our operations and our growth have been financed by cash
sale of investments was US$ 9.5 million as compared to US$9.7 generated from operations and from the proceeds of sales of equity
million in 2008. In 2009, our interest and dividend income were US$ shares.
11.2 million as compared to US$ 13.0 million in 2008. In 2009 we
We invest in units of mutual funds either in ‘open ended’ schemes or
had an interest expense reversal of US$2.8 million as a result of the
in ‘fixed maturity plans’. While the investments in ‘open ended’
completion of assessment by the IRS for years 2005 and 2006 with
mutual fund units can be sold any time without exit fees, the
regard to Patni Americas Inc. amounting to US$1.6 million and
investments in units of ‘fixed maturity plan’ can be sold subject to an
US$1.2 million on account of expiry of statute of limitation for year
exit fee of approximately 1%- to 2%. We have categorised our
ending March 2006 with regard to US Branch and in 2008 we had
investments in units of mutual fund schemes as ‘liquid mutual fund
an interest expense reversal of US$6.5 million as a result of the
units’ and ‘fixed maturity plans’ classified as ‘available for sale’
completion of assessment by the IRS for years 2003 and 2004 with
investments in our consolidated financial statements.
regard to Patni Americas Inc. and March 2003, 2004 and 2005 with
regard to US Branch. Our other income (expense), net was US$ 1.9 As of December 31, 2009, we had US$ 63.4 million in cash and cash

million in 2009, as compared to US$ 2.6 million in 2008 resulting in equivalents, US$ 357.2 million invested in units of liquid mutual

a decrease of US$ 0.7 million. funds, US$ 8.0 million invested in units of mutual fund (fixed
maturity plans) and US$ 10.7 million invested in other investments.
Income taxes As of December 31, 2008, we had US$ 60.1 million in cash and cash
We made a tax provision of US$ 4.7 million for income taxes in the equivalents, US$ 152.9 million invested in units of liquid mutual
year 2009 which included, reversal of US$8.3 million on account of funds, US$ 90.6 million invested in units of mutual fund (fixed

126 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

maturity plans) and US$ 2.1 million invested in other investments. As management on timely collections from the customers due to the
of December 31, 2009 and 2008, we have not incurred any exit fees credit crisis prevailing in the global markets and increased by US$
on investments in mutual fund units of fixed maturity plans. The 21.8 million in 2007.
investments portfolio mainly consist of investment in various debt
Current assets and other assets increased by US$4.6 million during
mutual funds and certificate of deposits with banks in India.
the year ended December 31, 2009 and decreased by US$ 19.3
Our working capital (comprising current assets excluding cash and million for the year ended December 31, 2008 and increased by US$
cash equivalents and investments less current liabilities) as at 20.4 million for the year ended December 31, 2007. Cash outflows
December 31, 2009 and at December 31, 2008 was US$ 53.4 million for the year ended December 31, 2009 were mainly on account of
and US$ 18.4 million, respectively. Our working capital is sufficient to payment of US$ 5.3 million in respect of deposit with tax authorities,
meet our present business and operational requirements. We had no and US$ 2.3 million on account of derivative contracts. Cash inflows
outstanding bank borrowings or long-term debt as of such date. Net for the year ended December 31, 2008 were mainly on account of
cash provided by operating activities was US$137 million, US$ 149.3 refund of US$ 6.8 million in respect of deposit with tax authorities,
million and US$ 111.3 million in the years ended December 31, and US$ 13.2 million on account of settlement of derivative
2009, 2008 and 2007, respectively. The adjustments for the year contracts. Cash outflows for the year ended December 31, 2007 were
ended December 31, 2009, to reconcile the US$ 119.8 million net US$ 6.8 million in respect of deposit placed with tax authorities in
income to net cash provided by operating activities, consisted India, US$ 10.2 million in derivative contracts and cash inflows for
primarily of depreciation and amortization of intangible expense of the year ended December 31, 2007 was mainly on account of the
US$ 26.2 million and deferred tax credit of US$ 8.9 million and gain US$ 0.9 million in gratuity asset.
from sale of investments of US$ 9.5 million. The adjustments for the
Accounts payable and accrued expenses decreased by US$ 1.3 million
year ended December 31, 2008, to reconcile the US$ 101 million net
for the year ended December 31, 2009 and increased by US$ 8.5
income to net cash provided by operating activities, consisted
million for the year ended December 31, 2008, compared to an
primarily of depreciation and amortization of intangible expense of
increase of US$ 6.3 million in 2007. The decrease in 2009,is on
US$ 27.7 million and deferred tax credit of US$ 9.2 million and gain
account of reduction of US$ 0.5 million in trade accounts payable
from sale of investments of US$ 9.7 million. The adjustments for the
and reduction of US$0.8 million accrued expenses. The reduction in
year ended December 31, 2007, to reconcile the US$ 114 million net
accrued expenses of US$ 0.8 million is mainly on account of
income to net cash provided by operating activities, consisted
reduction of US$ 1.2 million in sub-contractor cost, reduction of
primarily of depreciation expense of US$ 25.0 million and deferred
US$1.0 million in data link, reduction of US$ 3.7 million in facility
tax credit of US$ 10.1 million and gain from sale of investments of
related cost which is offset to some extent by increase in accruals
US$ 6.4 million. The increase in depreciation was due to an increase
pertaining to employee related expenses of US$ 5.2 million.
in investment in property, plant and equipment to develop and
expand our existing as well as new facilities. The net asset base was Our billings in excess of costs and estimated earnings on
US$147.6 million, US$ 150.9 million, and US$ 171.0 million in the uncompleted contracts, which represent billings in excess of revenues
years ended December 31, 2009, 2008 and 2007, respectively. that are recognised, decreased by US$0.5 million in the year ended
Provision for bad debts was US$ 2.3 million, US$ 1.6 million and US$ December 31, 2009 and increased by US$ 3.1 million and US$ 0.06
1.2 million for the year ended December 31, 2009, 2008 and 2007, million in the year ended December 31, 2008 and 2007, respectively.
respectively.
Taxes paid were US$ 29.5 million, US$ 17.0 million and US$23.3
Adjusted days of sales outstanding remained at 69 days for the year million as against a tax provision of US$ 31.9 million, US$ 14.4
ended December 31, 2009 and 2008 respectively as compared to 91 million and US$13.6 million for the years ended December 31, 2007,
days in the year ended December 31, 2007. Net accounts receivable 2008 and 2009, respectively.
and unbilled revenue decreased by US$15million and US$ 6.7 million
for the year ended December 31, 2009 and December 31, 2008 Other current liabilities and other liabilities decreased by US$5.3

respectively which is mainly due to the consistent efforts made by the million during the year ended December 31, 2009. The decrease in

> 127
 the year ended December 31, 2009 resulted from decrease of US$ 2008 and 2007, respectively. We paid US$ 9.3 million as dividends,
6.3 million in derivative liabilities and accrual vacation by US$2.3 including dividend tax, on our equity shares in the year ended
million, while increase in provision for volume discounts by US$4.9 December 31, 2009. We received proceeds of US$ 5.5 million from
million. Other current liabilities and other liabilities increased by US$ our employee stock option plan during the year ended December 31,
4.4 million and US$8.2 million during the year ended December 31, 2009. We spent US$ 53.1 million on purchase of common stock and
2008 and 2007 respectively. The increase in the year ended December paid US$ 11.4 million as dividends, including dividend tax, on our
31, 2008 resulted from increase of US$ 7.0 million in derivative equity shares in the year ended December 31, 2008. We received
liabilities, US$ 2.8 million increase in leave encashment provision, US$ proceeds of US$ 0.2 million from our employee stock option plan
1.9 million increase in sales discounts,US$ 2.6 million increase in during the year ended December 31, 2008. We paid US$ 11.9 million
statutory liabilities for tax deducted at source on payroll and Value in dividends, including dividend tax, on our equity shares in the year
Added Tax (VAT) payments, US$ 1.4 million increase in provision for ended December 31, 2007. We received proceeds of US$ 3.2 million
pension and reduction of US$ 11.2 million in other liabilities on from our employee stock option plan during the year ended
account of reversal of payroll and related taxes, interest and penalty December 31, 2007.
due to completion of assessment by the IRS for years 2003 and
We anticipate capital expenditures of between approximately US$ 20
2004.The increase during the year ended December 31, 2007
million to US$ 25 million in 2010, principally to finance the
resulted from increase of US$ 2.1 million in leave encashment
construction of our new knowledge park facilities in Pune, Phase II of
provision, US$ 2.2 million increase in deferred revenue, US$ 2.7
Navi Mumbai, Chennai and other facilities and physical infrastructure
million increase in other liabilities on account of advance received on
in India. Estimated amounts remaining to be executed on such
sale of furniture at India (Vashi) location, US$ 1.0 million increase in
contracts (net of advances), aggregated approximately to US$ 55.6
advance from customer and US$ 1.9 million decrease in other current
million at December 31, 2009 to be spent over a three year period.
liabilities.

Net cash used in investing activities was US$ 132.7 million for the
year ended December 31, 2009, US$ 35.5 million for 2008 and US$
130.0 million for 2007. Net cash used in the acquisition of property,
plant and equipment for the years ended December 31, 2009, 2008
and 2007 was US$19.0 million, US$ 43.4 million and US$ 61.9
million, respectively on account of the purchases of new facilities and
expansion of our existing facilities. Net purchases of investment
securities amounted to US$114.0 million and US$14.8 million for the
year ended December 31, 2009 and December 31, 2007 respectively
as against net sale of investment securities of US$ 4.0 million for the
year ended December 31, 2008. Net cash used in investing activities
in 2007 included US$ 21.4 million for the acquisition of Logan Orviss
and Taratec, net of cash acquired, US$ 20.4 million for acquisition of
technology related intangibles from one of our major customers and
additional purchase consideration to Cymbal shareholders amounted
to US$ 12.4 million for the year ended December 31, 2007.

Net cash used in financing activities was US$3.1 million, US$ 64.6
million and US$ 8.7 million for the years ended December 31, 2009,

128 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Financials under US GAAP

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Patni Computer Systems Limited

We have audited the accompanying consolidated balance operations and their cash flows for each of the years in the
sheets of Patni Computer Systems Limited and subsidiaries three year period ended December 31, 2009, in conformity
(‘the Company’) as of December 31, 2009 and 2008, and the with U.S. generally accepted accounting principles.
related consolidated statements of income, shareholders’
As discussed in Note 15 to the consolidated financial
equity and comprehensive income/(loss), and cash flows for
statements, the Company adopted FASB Statement No. 157
each of the years in the three year period ended December 31,
“Fair Value Measurements” (included in FASB ASC Topic 820,
2009. These consolidated financial statements are the
Fair Value Measurements and Disclosures), which establishes a
responsibility of the Company’s management. Our
common definition for fair value, framework for measuring fair
responsibility is to express an opinion on these consolidated
value and expands disclosure about such fair value
financial statements based on our audits.
measurements, as of January 1, 2008.
We conducted our audits in accordance with the standards of
We also have audited, in accordance with the standards of the
the Public Company Accounting Oversight Board (United
Public Company Accounting Oversight Board (United States),
States). Those standards require that we plan and perform the
Patni Computer Systems Limited’s internal control over
audit to obtain reasonable assurance about whether the
financial reporting as of December 31, 2009, based on criteria
financial statements are free of material misstatement. An
established in Internal Control – Integrated Framework issued
audit includes examining, on a test basis, evidence supporting
by the Committee of Sponsoring Organizations of the
the amounts and disclosures in the financial statements. An
Treadway Commission (COSO), and our report dated February
audit also includes assessing the accounting principles used
26,2010 expressed an unqualified opinion on the effectiveness
and significant estimates made by management, as well as
of the Company’s internal control over financial reporting.
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred

to above present fairly, in all material respects, the financial /s/ KPMG

position of Patni Computer Systems Limited and subsidiaries as Mumbai, India

of December 31, 2009 and 2008, and the results of their February 26, 2010

> 129
 Consolidated Balance Sheet (Amount in US$)
As of December 31, 2008 December 31, 2009

ASSETS
Current assets
Cash and cash equivalents $60,138,457 $63,459,115
Investments 245,529,769 375,858,138
Accounts receivable, net 111,813,743 109,409,586
Unbilled revenue 30,663,367 19,737,311
Advance income taxes 8,922,311 5,548,939
Deferred income taxes 9,796,021 9,418,969
Prepaid Expenses 2,586,241 2,837,972
Other current assets 6,934,944 16,695,605
Total current assets $476,384,853 $602,965,635
Advance income taxes $3,093,606 $3,827,873
Deferred income taxes 19,825,211 28,732,581
Investments 2,769,231 8,340,628
Other assets 19,956,864 20,948,736
Property, plant and equipment, net 150,930,327 147,631,897
Intangible assets, net 27,073,168 22,894,791
Goodwill 65,309,045 65,838,531
Total assets $765,342,305 $901,180,672
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Capital lease obligation $175,741 $112,399
Trade accounts payable 8,938,743 5,789,789
Billings in excess of costs and estimated earnings on uncompleted contracts 6,000,383 5,717,820
Income taxes payable 22,402,386 6,366,552
Accrued expenses 56,167,097 56,284,760
Other current liabilities 59,689,464 35,982,086
Total current liabilities $153,373,814 $110,253,406
Capital lease obligations excluding current portion $184,214 $90,681
Other liabilities 24,486,301 21,212,169
Income taxes payable 13,482,925 21,485,864
Deferred income taxes 2,858,796 1,104,920
Total liabilities $194,386,050 $154,147,040
Commitments and contingencies
Shareholders’ Equity
Common shares Rs. 2 par value; authorised 250,000,000 shares
(Issued and outstanding; 128,105,007 shares and 129,126,032 shares
as of December 31, 2008 and 2009 respectively). $5,672,130 $5,715,509
Additional paid-in capital 264,878,177 276,475,303
Retained earnings 375,215,818 485,732,388
Accumulated other comprehensive income /(loss) (74,809,870) (20,889,568)
Total shareholders’ equity $570,956,255 $747,033,632
Total liabilities and shareholders’ equity $765,342,305 $901,180,672

See accompanying notes to the consolidated financial statements

130 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Income (Amount in US$)

Year ended December 31, 2007 December 31, 2008 December 31, 2009
Net Revenues $662,911,669 $718,884,103 $655,918,121
Cost of revenues 450,085,130 491,266,302 421,309,231
Gross profit 212,826,539 227,617,801 234,608,890
Selling, general and administrative expenses 116,260,200 131,056,061 122,010,352
Provision for doubtful debts and advances 1,181,753 1,625,595 2,266,983
Foreign exchange (gain)/loss, net (23,350,920) 18,358,897 9,692,857
Operating income 118,735,506 76,577,248 100,638,698
Other income/(expense)
Interest and dividend income 12,540,158 13,001,582 11,223,406
Interest expense (3,592,436) (1,744,367) (1,494,179)
Interest expense reversed (refer note 11) – 6,497,329 2,807,576
Gain on sale of investments, net 6,370,002 9,731,648 9,468,467
Other (expense)/income, net 1,706,227 2,561,206 1,894,684
Income before income taxes 135,759,457 106,624,646 124,538,652
Income taxes 21,783,963 5,203,401 4,758,887
Net income $113,975,494 $101,421,245 $119,779,765
Earnings per share
Basic $0.82 $0.75 $0.93
Diluted $0.82 $0.75 $0.92
Weighted average number of common shares used
in computing earnings per share
Basic 138,660,785 135,590,677 128,254,916
Diluted 139,569,933 135,760,422 130,241,085

See accompanying notes to the consolidated financial statements

Consolidated Statements of Stockholders’ Equity and Comprehensive Income/(Loss)

for the years ended December 31, 2007, 2008 and 2009
((Amount in US$ except share data)
Common shares Additional Retained Comprehensive Accumulated Shareholders
Paid-in-Capital Earnings Income/(loss) Other Equity
Comprehensive
Shares Par value Income/(loss)
Balance as of January 1, 2007 138,281,853 6,122,960 305,030,981 183,197,559 14,241,716 508,593,216
Issuance of equity shares on exercise of options 727,556 35,084 3,203,887 3,238,971
Tax benefit arising on exercise of stock options 442,165 442,165
Compensation cost related to employee stock option plan 4,673,281 4,673,281
Cash dividend on common shares
(including corporate dividend tax) (11,934,467) (11,934,467)
Comprehensive income
Net income 113,975,494 113,975,494 113,975,494
Other comprehensive income:
Translation adjustment 58,571,590 58,571,590
Unrealised gain on investments,
net of tax benefit of $424,845 4,870,285 4,870,285
Unrealised losses on derivative instruments:
Unrealised holding gains (losses) arising during the year 10,750,148 10,750,148
Less: Reclassification adjustment included in net income (11,792,707) (11,792,707)
Actuarial losses related to pension and other
postretirement benefits, net of tax of $47,185 (423,876) (423,876)
Comprehensive income/(loss) 176,374,810 61,975,440
See accompanying notes to the consolidated financial statements

> 131
 Consolidated Statements of Stockholders’ Equity and Comprehensive Income/(Loss)
for the years ended December 31, 2007, 2008 and 2009
((Amount in US$ except share data)
Common shares Additional Retained Comprehensive Accumulated Shareholders
Paid-in-Capital Earnings Income/(loss) Other Equity
Comprehensive
Shares Par value Income/(loss)
Balance as of December 31, 2007 139,009,409 6,158,044 313,350,315 285,238,586 76,217,156 680,964,101
Issuance of equity shares on exercise of options 52,680 2,634 188,325 190,959
Purchase of Common Stock (10,957,082) (488,548) (52,573,794) (53,062,342)
Tax benefit arising on exercise of stock options 16,121 16,121
Compensation cost related to employee stock option plan 3,897,210 3,897,210
Cash dividend on common shares
(including corporate dividend tax) (11,444,013) (11,444,013)
Comprehensive income
Net income 101,421,245 101,421,245 101,421,245
Other comprehensive income:
Translation adjustment (119,927,020) (119,927,020)
Unrealised gain on investments,
net of tax expense of $ 257,690 (1,828,525) (1,828,525)
Unrealised losses on derivative instruments:
Unrealized holding gains (losses) arising during the
year, net of tax credit of ($2,201,998) (42,542,853) (42,542,853)
Less: Reclassification adjustment included in net income 12,068,379 12,068,379
Actuarial gain related to pension and other
postretirement benefits, net of tax of $195,797 1,202,993 1,202,993
Comprehensive income/(loss) (49,605,781) (151,027,026) –
Balance as of December 31, 2008 128,105,007 5,672,130 264,878,177 375,215,818 (74,809,870) 570,956,255

See accompanying notes to the consolidated financial statements

((Amount in US$ except share data)

Common shares Additional Retained Comprehensive Accumulated Shareholders
Paid-in-Capital Earnings Income/(loss) Other Equity
Comprehensive
Shares Par value Income/(loss)
Balance as of January 1, 2009 128,105,007 5,672,130 264,878,177 375,215,818 (74,809,870) 570,956,255
Issuance of equity shares on exercise of options 1,021,025 43,379 5,473,984 5,517,363
Tax benefit arising on exercise of stock options 814,537 814,537
Compensation cost related to employee stock option plan 5,308,605 5,308,605
Cash dividend on common shares
(including corporate dividend tax) (9,263,195) (9,263,195)
Net income 119,779,765 119,779,765 119,779,765
Other comprehensive income:
Translation adjustment 27,702,545 27,702,545
Reclassification of unrealised gain on investments,
net of tax expense of $301,521 to net income (3,944,229) (3,944,229)
Unrealized losses on derivative instruments:
Unrealized holding gains (losses) arising during the
year, net of tax benefit of $20,446 12,330,273 12,330,273
Less: Reclassification adjustment included in net income 18,199,724 18,199,724
Actuarial losses related to pension and other
postretirement benefits, net of tax benefit of $167,523 (368,011) (368,011)
Comprehensive income/(loss) 53,920,302 53,920,302
Balance as of December 31, 2009 129,126,032 5,715,509 276,475,303 485,732,388 ($20,889,568) $747,033,632

See accompanying notes to the consolidated financial statements

132 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Consolidated Statements of Cash Flows (Amount in US$)

Year ended December 31, 2007 December 31, 2008 December 31, 2009
OPERATING ACTIVITIES
Net income 113,975,494 101,421,245 119,779,765
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of fixed assets and intangible assets 25,053,060 27,711,972 26,251,592
Deferred taxes (10,130,035) (9,215,965) (8,865,238)
Provision for doubtful debts and advances 1,181,753 1,625,595 2,266,983
(Gain)/loss on sale of property, plant and equipment, net (265,426) (371,526) 252,091
Gain on sale of investments (6,370,002) (9,731,648) (9,468,467)
Compensation cost related to employee stock option plan 4,673,281 3,897,210 5,308,605
Deferred roll-over gains relating to cash flow hedges – – 4,192,350
Changes in assets and liabilities
Accounts receivable (13,492,304) 9,987,054 3,397,331
Unbilled revenue (8,300,239) (3,289,128) 12,087,746
Other current assets (21,663,190) 21,015,540 (7,703,814)
Other assets 1,252,142 (1,675,575) 3,150,343
Trade accounts payable others (1,804,558) (958,041) (484,602)
Billings in excess of costs and estimated earnings on uncompleted contracts 59,255 3,081,643 (460,188)
Taxes payable 11,218,123 (8,427,949) (5,983,096)
Excess tax benefit arising on exercise of stock options (442,165) (16,121) (814,537)
Tax benefit on exercise of stock options 47,841 14,739 451,624
Accrued expenses 8,104,178 9,463,589 (864,618)
Other current liabilities 4,222,173 14,263,756 (4,380,795)
Other liabilities 3,952,833 (9,453,334) (906,891)
Net cash provided by operating activities 111,272,214 149,343,056 137,206,185
INVESTING ACTIVITIES
Purchase of property, plant and equipment (61,891,010) (43,362,388) (18,983,035)
Proceeds from sales of property, plant and equipment 557,761 3,841,641 271,783
Purchase of investments (1,149,342,754) (973,062,275) (1,118,436,952)
Proceeds from sale of investments 1,134,569,183 977,051,287 1,004,449,630
Payments for acquisition, net of cash acquired (33,795,203) – –
Payments for acquisition of technology related intangibles (20,368,599) – –
Tax benefit on incentive stock option of Patni Telecom 235,057 – –
Net cash used in investing activities (130,035,565) (35,531,735) (132,698,574)
FINANCING ACTIVITIES
Payment of capital lease obligations (429,987) (293,418) (225,174)
Dividend on common shares (10,199,781) (9,778,450) (7,911,016)
Corporate Dividend tax paid (1,733,620) (1,662,387) (1,345,596)
Proceeds from common shares issued 3,238,971 190,958 5,517,363
Purchase of Common Stock – (53,062,342) –
Excess tax benefit arising on exercise of stock options 442,165 16,121 814,537
Net cash used in financing activities (8,682,252) (64,589,518) (3,149,886)
Effect of exchange rates changes on cash and cash equivalents 13,561,572 (21,709,325) 1,962,932
Net increase in cash and cash equivalents (27,445,603) 49,221,803 1,357,726
Cash and cash equivalents at the beginning of the year 46,510,010 32,625,979 60,138,457
Cash and cash equivalents at the end of the year 32,625,979 60,138,457 63,459,115
Supplemental disclosure of cash flow information:
Interest paid 26,764 $50,302 $41,757
Income taxes paid 29,532,237 16,993,377 23,303,213
Non cash investing and financing activities:
Additions to property, plant and equipment, represented by capital lease obligations 264,138 $149,745 $57,624
Property, plant and equipment acquired on credit 558,012 (3,158,568) (3,348,904)

See accompanying notes to the consolidated financial statements

> 133
 Notes to the Consolidated Financial Statements
1. Organization and nature of business prepared in accordance with accounting principles generally
1.1 Patni Computer Systems Limited (“Patni”) is a company accepted in the United States of America ("US GAAP").
incorporated in India under the Indian Companies Act, 1956. Principles of consolidation
In February 2004, Patni completed an initial public offering of 2.2 The consolidated financial statements include the financial
its equity shares in India. In December 2005, Patni also statements of Patni and all of its subsidiaries, which are all
completed an initial public offering of American Depository more than 50% owned and controlled. All inter-company
Shares in the United States of America (USA). accounts and transactions are eliminated on consolidation.
1.2 Patni Computers Systems (UK) Limited (“Patni UK”), a
Accounting estimates
company incorporated in the United Kingdom (UK), Patni
2.3 The preparation of consolidated financial statements in
Computer Systems GmbH (“Patni GmbH”), a company
conformity with US GAAP requires management to make
incorporated in Germany, Patni Americas, Inc. (“Patni USA”)
estimates and assumptions that affect the reported amount
formerly known as Patni Computer Systems, Inc., a company
of assets and liabilities and disclosures of contingent assets
incorporated in Massachusetts, USA and Patni Computer
and liabilities as of the date of the financial statements and
Systems Brasil, Ltda a company incorporated in Brazil are
the reported amounts of revenue and expenses during the
100% owned subsidiaries of Patni. On November 3, 2004,
reporting period. The most significant estimates relate to
Patni USA, acquired 100% equity in Patni Telecom Solutions
contract costs expected to be incurred to complete
Inc. (formerly known as Cymbal Corporation), a company
development of software, allowances for doubtful accounts
incorporated in California, USA, together with its subsidiaries
receivable, our future obligations under employee retirement
in India, UK & Thailand, for consideration in cash. Cymbal
and benefit plans, useful lives of property, plant and
Information Services (Thailand) Ltd., subsidiary of Patni
equipment and intangible assets, estimate of future cash
Telecom Solutions Inc. was dissolved and the liquidation was
flows used in assessing impairment, deferred tax assets and
completed in May, 2006. In July, 2007, Patni USA, acquired
liabilities and provisions for contingencies and litigation.
100% equity in Patni Life Sciences Inc. (formerly known as
The Management bases its estimates on historical experience
Taratec Development Corporation), a company incorporated
and on various other assumptions that are believed to be
in New Jersey, USA, for consideration in cash. Further, Patni
reasonable. The actual amounts may vary from the estimates
also has foreign branch offices in the USA, Japan, Sweden,
used in the preparation of the accompanying consolidated
Finland, Korea, Netherland, Australia, UAE, South Africa,
financial statements. Appropriate changes in estimates are
Canada, Turkey, Ireland, Romania and Switzerland. In March
made as management become aware of changes in
2008, Patni through it's wholly owned subsidiary Patni UK
circumstances surrounding the estimates. Changes in estimates
incorporated a subsidiary in Czech Republic named Patni
are reflected in the financial statements in the period in which
Computer Systems (Czech) s.r.o. In December 2008, Patni has
changes are made and, if material, their effects are disclosed in
set up a subsidiary in Mexico named PCS Computer Systems
the notes to consolidated financial statements.
Mexico, SA de CV. In June 2009, Patni has set up a subsidiary
in Singapore named Patni (Singapore) Pte Ltd. Revenue and cost recognition
2.4 The Company derives its revenues primarily from software
1.3 Patni together with its subsidiaries (collectively, "Patni Group" or
services and to a lesser extent from BPO services. Revenue is
"the Company") is engaged in IT consulting, software
recognised when there is persuasive evidence of a contractual
development and Business Process Outsourcing ("BPO"). The
arrangement with customers, delivery has occurred, the sales
Company provides multiple service offerings to its clients across
price is fixed or determinable and collectibility is probable.
various industries comprising financial services, insurance
Software services are provided either on a fixed price, fixed
services, manufacturing, retail and distribution,
time frame or on a time and material basis. Revenue with
communications, media and utilities and technology practice.
respect to time-and-material contracts are recognised as
(comprising of product engineering). The various service
related services are performed. The Company’s fixed price
offerings comprise application development, application
contracts include application maintenance and support
maintenance and support, packaged software implementation,
services, on which revenue is recognised ratably over the term
infrastructure management services, product engineering
of maintenance. Revenue with respect to other fixed price
services, quality assurance services and BPO services.
contracts is recognised on a percentage of completion basis.
1.4 These financial statements are prepared on a consolidated
The input (cost expended) method has been used because
basis for all the years presented.
management considers this to be the best available measure
2. Summary of significant accounting policies of progress on these contracts as there is a direct relationship
Basis of preparation of financial statements between input and productivity. Provisions for estimated
2.1 The accompanying consolidated financial statements have been losses, if any, on uncompleted contracts are recorded in the

134 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

period in which such losses become probable based on the Advertising cost
current contract estimates. 2.11 Advertising costs incurred during the year have been
2.5 The asset, “Costs and estimated earnings in excess of billings expensed. The total amount of advertising costs expensed
on uncompleted contracts”, represents revenues recognised was $0.9 million, $1.6 million and $1.34 million for the years
in excess of amounts billed. These amounts are billed after the ended December, 31, 2007, 2008 and 2009, respectively.
milestones specified in the agreement are achieved. The Cash and cash equivalents
liability, “Billings in excess of costs and estimated earnings on 2.12 The Company considers investments in highly liquid
uncompleted contracts”, represents billings in excess of investments with an original maturity of three months or less
revenues recognised. With effect from January 1, 2009 "Costs to be cash equivalents. Cash and cash equivalents comprise
and estimated earnings in excess of billings on uncompleted cash, deposits with banks and money market accounts.
contracts" has been disclosed as Unbilled revenue.
Investments
2.6 Direct and incremental contract origination and set up costs 2.13 Management determines the appropriate classification of
incurred in connection with support/maintenance service investment securities at the time of purchase and re-evaluates
arrangements are charged to expense as incurred. These costs such designation at each balance sheet date. At December
are deferred only in situations where there is a contractual 31, 2008 and 2009, investment securities were classified as
arrangement establishing a customer relationship for a available-for-sale or held to maturity. The investment
specified period. The costs to be deferred are limited to the securities classified as available-for-sale consists of units of
extent of future contractual revenues. Further, revenue mutual funds and other investments. Other investments
attributable to set up activities is deferred and recognised consists primarily of certificate of deposit with banks, which
systematically over the periods that the related fees are are carried at fair value based on the prices obtained from
earned, as services performed during such period do not independent third party dealers. Held to maturity securities
result in the culmination of a separate earnings process. consist of investment made by the Company in term deposits
Costs that are incurred for a specific anticipated contract and issued by the Government. These term deposits mature in two
that will result in no future benefits unless the contract is years from the time of deposit.
obtained, are not included in contract costs before the receipt 2.14 Available-for-sale securities are carried at fair market value
of the contract. However, such costs are deferred, subject to with unrealized gains and losses, net of deferred income
the evaluation of their probable recoverability. taxes, reported as a separate component of other
2.7 Warranty costs on sale of services are accrued based on comprehensive income in the statement of shareholders’
managements’ estimates and historical data at the time equity and comprehensive income/(loss). The fair values
related revenues are recorded. represent either the quoted market prices for the investments
2.8 The Company grants volume discounts to certain customers, at balance sheet date where available or Net Asset Value
which are computed based on a pre-determined percentage (“NAV”) as stated by the issuers of these mutual fund units in
of the total revenues from those customers during a specified the published statements. NAVs represent the price at which
period, as per the terms of the contract. These discounts are the issuer will issue further units in the mutual fund and the
earned only after the customer has provided a specified price at which the issuer will redeem such units from the
cumulative level of revenues in the specified period. The investors. Accordingly, such NAV are analogous to fair market
Company reports revenues net of discounts offered to value with respect to these investments as transactions of
customers. these mutual funds are carried out at such prices between
The Company estimates the total number of customers that investors and the issuers of these units of mutual funds.
will ultimately earn these discounts, based on which a portion Realized gains and losses, and decline in value judged to be
of the revenue on the related transactions is allocated to the other than temporary on available-for-sale securities are
services that will be delivered in the future. included in the consolidated statements of income. The cost of
Reimbursements of out of pocket expenses received from securities sold or disposed is determined on average cost basis.
customers have been included as a component of revenues. Trade accounts receivable
2.9 Revenues from BPO Services are derived from both time-based 2.15 Trade accounts receivable are recorded at the invoiced
and transaction-priced contracts. Revenue is recognised as the amount and do not bear interest. Amounts collected on trade
related services are performed, in accordance with the specific accounts receivable are included in net cash provided by
terms of the contracts with the customer. operating activities in the consolidated statements of cash
2.10 The Company reports taxes assessed by governmental flows. The Company maintains an allowance for doubtful
authorities which are directly imposed on revenue producing accounts for estimated losses resulting from the inability of
transactions on a net basis. our customers to make required payments. The allowance for

> 135
 Notes to the Consolidated Financial Statements (Contd.)

doubtful accounts is determined by evaluating the relative expenditures required to obtain the expected future cash
credit-worthiness of each customer, historical collections flows from the asset.
experience and other information, including the aging of the 2.19 Intangible assets are evaluated for recoverability whenever
receivables. Account balances are charged off against the events or changes in circumstances indicate that their
allowance after all means of collection have been exhausted carrying amounts may not be recoverable. Recoverability of
and the potential for recovery is considered remote. assets to be held and used is measured by a comparison of
Business combinations, goodwill and intangible assets the carrying amount of an asset to future undiscounted net
2.16 The Company accounts for its business combinations under the cash flows expected to be generated by the asset. If such
purchase method of accounting. Intangible assets acquired in a assets are considered to be impaired, the impairment to be
business combination are recognised and reported separately recognised is measured by the amount by which the carrying
from goodwill. All assets and liabilities of the acquired value of the assets exceeds the fair value of the assets.
businesses, including goodwill, are assigned to reporting units. Property, plant and equipment
2.17 Goodwill represents the cost of the acquired businesses in 2.20 Property, plant and equipment are stated at cost less
excess of the fair value of identifiable tangible and intangible accumulated depreciation and amortization. Gains and losses
net assets purchased. Goodwill is not amortised but is tested on disposals are included in the consolidated statements of
for impairment at least on an annual basis at year end, relying income at amounts equal to the difference between the net
on a number of factors including operating results, business book value of the disposed assets and the net proceeds
plans and future cash flows. Recoverability of goodwill is received upon disposal. Expenditures for replacements and
evaluated using a two-step process. Under the first step, the improvements are capitalised, whereas the cost of
fair value of the reporting unit is compared with its carrying maintenance and repairs is charged to income when incurred.
value (including goodwill). If the fair value of the reporting 2.21 Property, plant and equipment are depreciated over the
unit is less than its carrying value, an indication of goodwill estimated useful life of the asset using the straight-line
impairment exists for the reporting unit and the step two of method, once the asset is put to its intended use. The cost of
the impairment test (measurement) is performed. Under step software obtained for internal use is capitalised and
two, an impairment loss is recognised for any excess of the amortised over the estimated useful life of the software. The
carrying amount of the reporting unit’s goodwill over the estimated useful lives of assets are as follows:
implied fair value of that goodwill. The implied fair value of
Buildings 40 years
goodwill is determined by allocating the fair value of the
Leasehold premises Over the lease period or the
reporting unit in a manner similar to a purchase price
and improvements useful lives of the assets,
allocation, in a business combination. The residual fair value
whichever is shorter
after this allocation is the implied fair value of the reporting
Computer – Hardware 3 years
unit goodwill. Fair value of the reporting unit is determined
and software and other
using a discounted cash flow analysis. If the fair value of the
service equipments
reporting unit exceeds its carrying value, step two does not
Furniture and fixtures 3-8 years
need to be performed. The Company performs its annual
impairment review of goodwill at December 31, and when a Other equipment 3-8 years
triggering event occurs between annual impairment tests. Vehicles 4-5 years
Based on the results of its annual impairment tests, the Impairment of long-lived assets and long-lived assets to
Company determined that no impairment of goodwill existed be disposed
as of December 31, 2009 or December 31, 2008. 2.22 Long-lived assets and certain identifiable intangible assets are
2.18 Intangible assets acquired either through a business reviewed for impairment whenever an event or changes in
combination or individually are amortised over their circumstances indicate that the carrying amount of such
respective individual estimated useful lives in proportion to assets may not be recoverable. Recoverability of assets to be
the economic benefits consumed in each period. Intangible held and used is measured by a comparison of the carrying
assets comprise customer and technology related intangible amount of an asset to future net undiscounted cash flows
assets and are being amortised over a period of 3-10 years. expected to be generated by the asset. If the carrying value
The estimated useful life of an identifiable intangible asset is exceeds the expected undiscounted cash flows of the asset,
based on a number of factors including the effects of the impairment to be recognised is measured by the amount
obsolescence, demand, competition and other economic by which the carrying amount of the assets exceeds the fair
factors (such as the stability of the industry, and known value of assets. Assets to be disposed of are reported at the
technological advances) and the level of maintenance lower of the carrying amount or fair value less cost to sell.

136 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

Functional and Foreign currency translation measurement are reflected in the period in which the change
2.23 The functional currency of Patni and its branches in the USA, in judgment occurs.
Japan, Sweden, Finland, UAE, South Africa, Australia, Korea, Concentration of credit risk
Netherland, Canada, Turkey, Ireland, Romania and 2.27 Financial instruments that potentially subject the Company to
Switzerland is the Indian Rupee. The functional currencies of concentration of credit risks consist principally of cash
Patni's subsidiaries are the applicable local currencies. equivalents, investments and accounts receivables. Cash
2.24 The accompanying consolidated financial statements are equivalents are invested with banks with investment grade
reported in US Dollars. The translation is performed for credit ratings. To reduce credit risk, investments are made in
balance sheet accounts using the exchange rate in effect at a diversified portfolio of mutual funds, government bonds,
the balance sheet date and for statements of income which are periodically reviewed. To reduce its credit risk on
accounts using the exchange rate prevailing on the date of accounts receivables, the Company performs ongoing credit
those transactions. In respect of subsidiaries, the respective evaluations of customers.
functional currencies are first translated into Indian Rupees Retirement benefits to employees
and then into US Dollars. The gains or losses resulting from 2.28 Contributions to defined contribution plans are charged to
such translation are reported in other comprehensive income/ income in the period in which they accrue. Current services
(loss) in the statement of shareholders’ equity and costs for defined benefit plans are accrued in the period to
comprehensive income/ (loss). which they relate. The liability in respect of defined benefit
Foreign currency transactions plans is calculated annually by a qualified actuary using the
2.25 Transactions in foreign currencies are translated into the projected unit credit method. The Company recognises the
functional currency at the rates of exchange prevailing at the net funded position of its plans as an asset or liability in the
date of the transaction. Resulting gains or losses from consolidated balance sheets.
settlement of such foreign currency transactions are included In measuring the defined benefit obligations, the Company
in the consolidated statements of income. Unsettled uses discount rates based on yields of high quality fixed
monetary assets and liabilities denominated in foreign income instruments (i.e. yields on high quality corporate
currencies are translated into the functional currency at the bonds) prevailing as at the balance sheet date for the
rates of exchange prevailing at the balance sheet date. A corresponding tenure of the obligations.
transaction gain or loss arising from a change in exchange Stock-based compensation
rates between the date of a transaction and the year end 2.29 Effective January 1, 2006, the Company recognizes
exchange rates is included in the consolidated statements of compensation expense relating to share-based payments
income. granted after this date in net income using a fair value
Income taxes measurement method. Under the fair value method, the
2.26 Income taxes are accounted for under the asset and liability estimated fair value of awards is charged to income on a
method. Deferred tax assets and liabilities are recognised for accelerated basis over the requisite service period, which is
the future tax consequences attributable to differences generally the vesting period. The Company implemented this
fair value model using the modified prospective method and
between the financial statement carrying amounts of existing
therefore, prior periods were not restated. Under the
assets and liabilities and their respective tax bases and
modified prospective method, fair value accounting was
operating loss carry forwards. Deferred tax assets and
applied to new awards granted after the time of adoption, as
liabilities are measured using enacted tax rates expected to
well as to the unvested portion of previously granted equity-
apply to taxable income in the years in which those temporary
based awards for which the requisite service had not been
differences are expected to be recovered or settled. The effect
rendered as of January 1, 2006. The Company granted stock
on deferred tax assets and liabilities of changes in tax rates is
options under the ‘Patni ESOP 2003 Revised 2006’ plan (‘the
recognised in results of operations in the period that includes
plan’). See Note 18 for further discussion.
the enactment date. The measurement of deferred tax assets
2.30 Prior to the adoption of fair value accounting, the Company
is reduced, if necessary, by a valuation allowance if it is more
recorded benefits associated with the tax deductions in excess
likely than not that some portion or all of the assets will not
of recognised compensation cost as an operating cash flow.
be realised.
Subsequent to the adoption of fair value accounting such
From January 1, 2007, the Company recognizes the effect of
benefits have been recorded as a financing cash inflow. In the
income tax positions only if those positions are more likely
accompanying consolidated statements of cash flows for year
than not of being sustained. recognised income tax positions
ended December 31, 2007, 2008 and 2009, tax benefit of
are measured at the largest amount that is greater than 50%
$442,165, $16,121 and $814,537, respectively has been
likely of being realized. Changes in recognition or
classified as financing cash flows.

> 137
 Notes to the Consolidated Financial Statements (Contd.)

2.31 Effective April 1, 2007, an amendment has been made to comprehensive income/(loss) until the hedged transactions
Indian Income Tax Act 1961 subjecting specified securities occur and are then recognised in the consolidated statements
allotted or transferred by an employer to its employees to of income. In respect of derivatives acquired pursuant to roll-
Fringe Benefit Tax (FBT). The liability to pay FBT by the over hedging strategy, the forward premium/discount points
employer arose at the time of allotment of the securities, are excluded from assessing hedge effectiveness. Changes in
consequent to exercise of option by the employees and is fair value for derivatives not designated as hedging
calculated on the difference between the fair value of the instruments and ineffective portion of the hedging
underlying share on the date of vesting and the exercise price instruments are recognised in consolidated statements of
paid by the employee based on the corporate tax rate. The income in the current period.
FBT arising from such allotment of a specified option is 2.35 In respect of derivatives designated as hedges, the Company
collectible from employees, which is considered as additional formally documents all relationships between hedging
exercise price of the option as this would reduce the ultimate instruments and hedged items, as well as its risk management
benefit to the employee and therefore is recognised as objective and strategy for undertaking various hedge
additional paid-in-capital. transactions. The Company also formally assesses, both at the
On August 18, 2009, a further amendment was made to the inception of the hedge and on an ongoing basis, whether
Indian Income Tax Act, with retroactive effect from April 1, each derivative is highly effective in offsetting changes in fair
2009, abolishing the provisions of FBT. Thus, for any exercises values or cash flows of the hedged item. If it is determined
of stock options by the employee on or after April 1, 2009, that a derivative is not highly effective as a hedge, or if a
the shares issued, or allotted and transferred by the derivative ceases to be a highly effective hedge, the Company
Company, are no longer subject to FBT. will, prospectively, discontinue hedge accounting with
Since the abolition of the provisions of FBT, such deemed respect to that derivative. The derivatives, which do not
increase to the stock option exercise price is no longer qualify for hedge accounting, are recognised at fair value with
necessary. This change has been accounted for as a gains or losses included in foreign exchange (gain)/loss in the
modification in the exercise price of the existing outstanding consolidated statements of income.
options. Accordingly, the difference in the fair value of the Earnings per share
unvested outstanding options immediately before the 2.36 Basic earnings per share is computed using the weighted
modification and after the modification will be recognised as average number of common outstanding during the year.
incremental share-based compensation over the remaining Diluted earnings per share is computed using the weighted
vesting period. For the options vested and outstanding as on average number of common and dilutive common equivalent
the date of modification, the incremental cost has been shares outstanding during the year using the treasury stock
recognised in the statement of income immediately on the method for options except where the result would be anti-
date of modification. dilutive.
Dividends Commitments and Contingencies
2.32 Dividends on common shares are recorded as a liability on the 2.37 Liabilities for loss contingencies arising from claims,
date of declaration by the shareholders at the Annual General assessments, litigations, fines and penalties and other sources
Meeting. are recorded when it is probable that a liability has been
Derivatives and hedge accounting incurred and the amount of the assessment and/or
2.33 The Company enters into forward foreign exchange remediation can be reasonably estimated.
contracts/option contracts (derivatives) to manage the risk of Reclassifications
changes in foreign exchange rates on inter company and end 2.38 Certain reclassifications have been made in the financial
customer accounts receivable and forecasted sales transactions statements of prior years to conform to classifications used in
denominated in foreign currencies. The strategy also includes the current year.
entering into short-term forward foreign exchange contracts
Recently Issued Accounting Standards
which are replaced with successive new contracts up to the
2.39 In August 2009, the FASB issued revised authoritative
period in which the forecasted transactions are expected to
guidance ASU 2009-05 (previously FSP FAS 157-f) regarding
occur (roll-over hedging). Upon completion of the formal
the measurement of liabilities at fair value which provides
documentation and testing for effectiveness, the Company
clarification that in circumstances where a quoted market
designates forward and option contracts, which meet the
price in an active market for an identical liability is not
hedging criteria, as cash flow hedges.
available, a reporting entity must measure fair value of the
2.34 Changes in fair values of designated cash flow hedges are liability using one of the following techniques: 1) the quoted
deferred and recorded as a component of accumulated other price of the identical liability when traded as an asset; 2)

138 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

quoted prices for similar liabilities or similar liabilities when basis for conclusions on the change(s) in the Codification.
traded as assets; or 3) another valuation technique, such as a References made to FASB guidance throughout this
present value technique or the amount that the reporting document have been updated for the Codification. The
entity would pay to transfer the identical liability or would adoption of this standard did not have any impact on the
receive to enter into the identical liability. This statement Company's consolidated financial position, results of
becomes effective for the first reporting period (including operations and cash flows.
interim periods) beginning after issuance, which is the first 2.42 In December 2007, the FASB issued ASC No. 805 (previously
quarter of fiscal 2010 for the Company. The Company SFAS No 141R), Business Combinations and ASC No. 810
believes that this guidance will not have any impact on the (previously FAS Statement No. 160), Noncontrolling Interests
Company's consolidated financial position, results of in Consolidated Financial Statements – an amendment to ASC
operations or cash flows. No. 810 ("ASC No. 810-10-65"). ASC 805 and 810 require
2.40 In June 2009, the FASB issued authoritative guidance ASC most identifiable assets, liabilities, noncontrolling interests,
810 (previously SFAS 167 "Consolidation of variable interest and goodwill acquired in a business combination to be
entities") which revises the approach to determining when an recorded at “full fair value” and require noncontrolling
entity that is insufficiently capitalised or not controlled interests (previously referred to as minority interests) to be
through voting rights (referred to as a variable interest entity reported as a component of equity, which changes the
or “VIE”) should be consolidated. The new consolidation accounting for transactions with noncontrolling interest
model for VIEs considers whether the enterprise has the holders. The Company adopted ASC 805 January 1, 2009 and
power to direct the activities that most significantly impact will apply this standard to business combinations from this
the VIE’s economic performance and shares in the significant date onwards. The adoption of ASC 805 and ASC 810 did not
risks and rewards of the entity. This guidance requires have any impact on the Company's consolidated financial
companies to continually reassess their involvement with VIEs position, results of operations, cash flows or its disclosures.
to determine if consolidation is appropriate and provide 2.43 In April 2008, the FASB issued ASC No. 350-30 (previously
additional disclosures about their involvement with them. FSP SFAS No 142-3 “Determination of the Useful Life of
This guidance is effective for the Company’s 2010 fiscal year Intangible Assets”). ASC No. 350-30 amends the factors an
and the Company believes that this guidance will not have entity should consider in developing renewal or extension
any impact on the Company's consolidated financial position, assumptions used in determining the useful life of recognised
results of operations or cash flows. intangible assets under ASC No. 350, Goodwill and Other
Recently adopted accounting standards Intangible Assets. This new guidance applies prospectively to
2.41 Effective July 1, 2009, the Company adopted the Financial intangible assets that are acquired individually or with a
Accounting Standards Board (“FASB”) Accounting Standards group of other assets in business combinations and asset
Codification (“ASC”) 105-10 (previously SFAS No 168), acquisitions after the effective date. The Company adopted
Generally Accepted Accounting Principles – Overall (“ASC 105- ASC No. 350-30 January 1, 2009 which did not have any
10”). ASC 105-10 establishes the FASB Accounting Standards impact on the Company's consolidated financial position,
Codification (the “Codification”) as the source of authoritative results of operations, cash flows or its disclosures.
accounting principles recognised by the FASB to be applied by 2.44 In December 2008, the FASB issued ASC 715-20-05
nongovernmental entities in the preparation of financial (previously FSP FAS 132(R)-1), “Employer's Disclosures about
statements in conformity with U.S. GAAP. Rules and Postretirement Benefit Plan Assets”). The ASC requires
interpretive releases of the SEC under authority of federal enhanced disclosures about plan assets currently required by
securities laws are also sources of authoritative U.S. GAAP for ASC 715, Employer's Disclosures about Pensions and Other
SEC registrants. All guidance contained in the Codification Postretirement Benefits. ASC 715-20-05 requires more
carries an equal level of authority. The Codification superseded detailed disclosures about employers' plan assets, including
all existing non-SEC accounting and reporting standards. All employers' investment strategies, major categories of plan
other non-grandfathered, non-SEC accounting literature not assets, concentrations of risk within plan assets, and valuation
included in the Codification is non-authoritative. techniques used to measure the fair value of plan assets. The
The FASB will not issue new standards in the form of Company adopted these disclosure requirements in these
Statements, FASB Staff Positions or Emerging Issues Task consolidated financial statements. See Note 20.
Force Abstracts. Instead, it will issue Accounting Standards 2.45 On January 1, 2009, the Company adopted ASC No. 820-10
Updates (“ASUs”). (previously FSP SFAS No 157-2), Effective Date of ASC No.
The FASB will not consider ASUs as authoritative in their own 820 (“ASC No. 820-10”), which delays the effective date of
right. ASUs will serve only to update the Codification, provide ASC No. 820 for all nonfinancial assets and nonfinancial
background information about the guidance and provide the liabilities, except those that are recognised or disclosed at fair

> 139
 Notes to the Consolidated Financial Statements (Contd.)

value in the financial statements on a recurring basis to fiscal events or transactions that occurred after December 31, 2009
years beginning after November 15, 2008. The adoption of through February 26 2010 the date the Company issued these
ASC No. 820-10, did not have any impact on the Company's financial statements. During this period the Company did not
consolidated financial position, results of operations and cash have any material recognizable subsequent events.
flows. 3. Acquisitions
2.46 On January 1, 2009, the Company adopted ASC No. 815 3.1 Acquisition of business and assets of Logan-Orviss
(previously SFAS No 161 “Disclosures about Derivative International Associates BV (‘LOI’)
Instruments and Hedging Activities”). This standard requires On July 2, 2007, the Company acquired 100% of the business
enhanced disclosures about (a) how and why an entity uses and assets of LOI, a European telecommunications consulting
derivative instruments (b) how derivative instruments and services Company. The Company believes that through this
related hedged items are accounted and (c) how derivative acquisition it will strengthen its presence in communication
instruments and related hedged items affect an entity’s and media practice through consultancy services on IT
financial positions, financial performance and cash flows. The initiatives. The purchase price of $8,613,938 (including direct
Company adopted these disclosures requirements in these acquisition related expenses of $863,938) was paid in cash.
consolidated financial statements. See Note 16. This transaction has been accounted using the purchase
2.47 On April 9, 2009 the Financial Accounting Standards Board method. The purchase price has been allocated to the
('FASB') issued three ASC's to provide additional application acquired assets as per management’s estimates and
guidance and enhance disclosures regarding fair value independent valuation of fair values as summarised below:
measurements and impairments of securities. ASC 820-10-65
Intangible assets
(previously FSP FAS 157-4), Determining Fair Value When the
- Customer contracts and
Volume and Level of Activity for the Asset or Liability Have
non contractual customer
Significantly Decreased and Identifying Transactions That Are
relationships 1,370,000
Not Orderly, provides guidelines for making fair value
- Intellectual property rights 790,000 2,160,000
measurements more consistent with the principles presented
Goodwill 6,453,938
in ASC No. 820, Fair Value Measurements. ASC 820-10-50,
Total purchase price $8,613,938
Interim Disclosures about Fair Value of Financial Instruments,
Goodwill generated from the above acquisition was allocated
enhances consistency in financial reporting by increasing the
to “Communications, Media and Utilities” segment.
frequency of fair value disclosures.
Further, as a part of the business acquisition, the Company
ASC 320-10-65 (previously FSP FAS 115-2 and FAS 124-2),
initiated an incentive plan linked to revenues for certain
Recognition and Presentation of Other-Than-Temporary
specific employees. Management estimates that incentive
Impairments, provides additional guidance designed to create
payments under this plan will not exceed $13,080,000
greater clarity and consistency in accounting for and presenting
through June 2010. Since, the incentive payments are linked
impairment losses on securities. The Company began providing
to continuing employment, the payments under the plan are
the related disclosures starting with our interim financial
recognised as compensation costs for post acquisition
statements as of June 30, 2009. The adoption of these ASC did
services. Based on the assessment of the revenue targets
not have any impact on the Company's consolidated financial
achieved for the contractual year ended June 30, 2008, and
position, results of operations and cash flows.
June 30, 2009 an amount of $117,108 and $ 123,810
2.48 In May 2009, the Financial Accounting Standards Board
respectively has been accrued as compensation cost for these
(FASB) issued ASC No. 855 (previously SFAS No 165),
employees. Further, based on the assessment of revenue
Subsequent Events (“ASC 855”). ASC 855 is intended to
targets expected to be achieved for the contractual year
establish general standards of accounting for and disclosure
ending June 30, 2010, an additional amount of $41,504 has
of events that occur after the balance sheet date but before
been recorded as selling, general and administrative expenses
financial statements are issued or are available to be issued.
for these employees for the year ended December 31, 2009.
It requires the disclosure of the date through which an entity
has evaluated subsequent events and the basis for that date 3.2 Acquisition of Taratec Development Corporation (Taratec)
that is, whether that date represents the date the financial On July 23, 2007, Patni USA acquired 100% equity interest in
statements were issued or were available to be issued. Taratec Development Corporation (subsequently named as
Patni Life Sciences Inc), which is a leading consulting
This disclosure should alert all users of financial statements that
company in the life sciences industry providing integrated
an entity has not evaluated subsequent events after that date in
business, information technology, and regulatory compliance
the set of financial statements being presented. ASC 855
products and services.
(previously SFAS No 165) is effective for interim and annual
periods ending after June 15, 2009. The Company evaluated all The primary purpose for the acquisition was to enhance

140 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

Patni’s market specific services and provide additional 4. Cash and Cash Equivalents
capability to support the growing and diverse requirements of Cash and cash equivalents held by the Company account wise
the life sciences market, from pharmacovigilance to demand- are as follows:
driven supply chains. The purchase price of $15,680,226 As of December 31, 2008 2009
(including direct acquisition related expenses of $435,008), Bank Account $58,033,968 $63,337,520
was paid in cash on July 23, 2007. Money in Transit 982,397 58,084
The terms of the purchase also provide for payment of Term Deposits 1,026,777 –
contingent consideration to all the selling shareholders, Cash in Hand 95,315 63,511
payable over three years, and calculated based on the Total $60,138,457 $63,459,115
achievement of specified revenue and margin targets. The
Cash and cash equivalents as of December 31, 2008 and
contingent consideration is payable in cash and cannot
2009 include restricted cash balance of $9,755 and $16,557,
exceed $13,200,000.
respectively. Restrictions are primarily on account of
The Company accounts for the contingent payments, other unclaimed dividends.
than payments to certain employees under the incentive plan
The following table sets out the break-up of cash and cash
described below, as goodwill in the periods in which the
equivalents held in banks:
contingency is resolved.
Further, as a part of the acquisition, the Company initiated an As of December 31, 2008 2009
incentive plan linked to revenues and margins, for certain Bank Accounts
specific employees of Taratec and Patni. The incentive payments Bank of America , USA $31,804,624 $26,147,543
under this plan will not exceed $3,500,000 through June 2010. Handelsbanken, Finland. 2,038,103 1,949,616
Since, the incentive payments are linked to continuing Standard Bank of S Africa,
employment, the payments under the plan are recognised as South Africa 1,840,823 2,777,323
compensation for post acquisition services. Based on the ABN Amro Bank N.V, India 1,780,079 447,070
assessment of the revenue and margin targets achieved Commerce Bank, USA 1,637,792 -
through the contractual year ended July 31, 2008, and July 31, Standard Chartered Bank, India 1,350,050 318,551
2009, the management has concluded that no compensation Citibank N.A., India 1,317,536 2,042,601
cost is required to be accrued for these employees. Further Natwest Bank , UK 1,282,157 10,697,690
based on the assessment for the revenue and margin targets Bank of Tokyo, Japan 1,270,163 1,269,330
expected to be achieved for the contractual year ending July 31, Deutsche Bank ,Germany 1,254,592 926,481
2010, the management has concluded that no compensation ANZ Bank, Australia 1,052,805 2,040,269
cost is required to be accrued for these employees during the AK Bank, Turkey - 2,364,193
year ended December 31, 2009. Citibank EEFC Bank
accounts, India 3,423,021 2,811,973
This transaction has been accounted using the purchase
Standard Chartered Bank-
method of accounting. The purchase price, net of cash
EEFC accounts, India 1,231,418 6,452,547
acquired of $2,843,782, has been allocated to the acquired
Others * 6,750,804 3,092,333
assets and assumed liabilities as per management’s estimates
58,033,968 63,337,520
and independent valuation as summarised below:
Money in transit $982,397 $58,084
Net current assets $ 2,528,948 Term Deposits
Deferred tax asset 920,600 Merrill Lynch, USA 1,137 -
Property, plant and equipment 84,538 Yes Bank, India 1,025,640 -
Deferred tax liability (696,000) Total $1,026,777 -
Intangible assets Cash in Hand $95,315 $63,511
- Customer contracts and Cash and Cash Equivalents $60,138,457 $63,459,115
non contractual customer
relationships 1,550,000 * Others include bank balances in various accounts with
- Intellectual property rights 190,000 1,740,000 banks spread across various locations in which the Company
Goodwill 8,258,358 held balances of less than $1 million individually.
Total purchase price $ 12,836,444
Goodwill generated from the above acquisition was allocated
to “Manufacturing services” segment.

> 141
 Notes to the Consolidated Financial Statements (Contd.)

5. Investments
5.1 Investment securities consist of the following: (Amount in US$)
As of December 31, 2008
Cost of Gross unrealized Gross unrealised Fair value
Purchase holding gains holding losses
Available for sale:
Mutual Fund Units:
- Liquid $151,126,457 $1,788,582 ($10,307) $152,904,732
- Fixed Maturity 85,569,637 4,980,890 (6) $90,550,521
Other Investments 2,008,240 66,276 - $2,074,516
Amount reported as investments – current $238,704,334 $6,835,748 ($10,313) $245,529,769
Held to maturity:
Bonds $2,769,231
Amount reported as investments- non current $2,769,231
As of December 31, 2009
Cost of Gross unrealized Gross unrealised Fair value
Purchase holding gains holding losses
Available for sale:
Mutual Fund Units:
- Liquid $355,745,005 $1,444,038 ($10,774) $357,178,269
- Fixed Maturity 7,523,646 486,318 - 8,009,964
Other Investments 10,009,802 660,103 - 10,669,905
Amount reported as investments – current $ 373,278,453 $2,590,459 ($10,774) $375,858,138
Held to maturity:
Term deposit $ 2,966,595
Non-Convertible Debentures $ 5,374,033
Amount reported as investments- non current $ 8,340,628

5.2 Dividends from securities available for sale and gross realised
gains and losses on sale of securities available for sale are as As of December 31, 2008 2009
follows: Available for Sale Securities
Year ended December 31, 2007 2008 2009 IDFC Mutual Fund $18,441,673 $68,953,565
ICICI Prudential Mutual Fund 42,692,251 34,643,289
Dividends from securities
Reliance Mutual Fund 34,918,630 36,770,299
available for sale $9,946,965 $11,510,937 $10,425,493
Kotak Mutual Fund 25,128,363 31,139,138
Gross realised gains on
HDFC Mutual Fund 2,647,146 34,385,614
sale of securities available
Birla Sunlife Mutual Fund 32,007,002 41,763,517
for sale 6,401,863 10,477,436 9,703,109
Tata Mutual Fund 30,461,581 40,274,464
Gross realised losses on
Religare Mutual Fund 7,237,046 14,045,079
sale of securities
Deutsche Mutual Fund 7,952,685 43,321,081
available for sale 31,861 745,788 234,642
Fortis Mutual Fund 5,739,249 13,019,007
5.3 Maturity profile of investment securities classified as available- JM Financial Mutual Fund 13,991,066 1,051,789
for-sale and held-to-maturity are as follows as of December DSP BlackRock Mutual Fund 12,123,623 -
31, 2009: HSBC Mutual Fund 3,956,269 4,153,983
Franklin Templeton Mutual Fund 6,158,668 1,667,407
Cost of Purchase Fair Value Global Treasury Fund 5,916 -
Available for Sale: $243,461,168 $365,188,233
Mutual Fund Units Other Investments:
(Fixed Maturity) Investment in Certificates of
- Within one year $7,523,646 $8,009,964 Deposit with Banks
$7,523,646 $8,009,964 Canara Bank 2,024,878 10,659,695
Held to Maturity : Total 2,024,878 10,659,695
-Due after one year Others 43,723 10,211
through five years 43,723 10,211
Term deposit $2,966,595 Total 245,529,769 375,858,138
Non-Convertible Debentures $5,374,033 Held to Maturity
$8,340,628 NABARD Capital Gains Bonds 2,769,231 -
Non-Convertible Debentures - 5,374,033
5.4 Investment securities are held in the following mutual fund NABARD Term Deposit - 2,966,595
and other investment schemes: Total 2,769,231 8,340,628

142 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

6 Accounts receivable 8. Other assets

6.1 Accounts receivable consist of the following: Other assets consist of the following:
As of December 31, 2008 2009
As of December 31, 2008 2009
Advances to vendors $1,317,240 $984,491
Receivables $114,736,385 $112,296,848 Refundable security deposit 6,457,639 6,247,167
Less: Allowances for Deferred cost in respect of
revenue arrangements 1,689,331 3,341,877
doubtful accounts (2,922,642) (2,887,262)
Due from employees 1,646,155 803,557
$111,813,743 $109,409,586
Derivative contracts 75,424 2,400,791
6.2 The activity in the allowance for doubtful accounts receivable Leasehold Land 13,833,378 17,815,804
Deposit with tax authorities - 5,464,456
for the years ended December 31, 2007, 2008 and 2009 is as
Others 1,872,641 586,198
follows: $26,891,808 $37,644,341
Less : Other current assets
As of December 31, 2007 2008 2009
Advances to vendors (1,317,240) (984,491)
Allowance for Refundable security deposit (353,433) (3,137,830)
doubtful accounts Deferred cost in respect of
as of the beginning revenue arrangements (1,689,331) (3,341,877)
of the year $3,105,764 $2,327,490 $2,922,642 Due from employees (1,626,875) (779,962)
Derivative contracts (75,424) (2,400,791)
Additional provision
Deposit with tax authorities - (5,464,456)
(net of recoveries)
Others (1,872,641) (586,198)
made during the year 1,050,245 1,561,630 2,269,998 (6,934,944) (16,695,605)
Accounts receivable Other assets $19,956,864 $20,948,736
written off against
9. Property, plant and equipment
the allowance during 9.1 Property, plant and equipment consists of the following:
the year (1,828,519) (966,478) (2,305,379) As of December 31, 2008 2009
Allowance for Land $3,508 $3,676
doubtful accounts Building 56,885,137 78,456,910
as of the end of Leasehold improvements 6,960,380 7,875,532
Computer – Hardware and
the year $2,327,490 $2,922,642 $2,887,262
other service equipment 49,981,070 52,152,209
7. Unbilled revenue and billings in excess of costs and Computer – Software 28,665,685 35,554,632
estimated earnings on uncompleted contracts Furniture and fixtures 19,153,158 22,185,317
Other equipment 38,046,505 42,671,510
As of December 31, 2008 2009 Vehicles 1,579,933 1,389,021
Capital work-in-progress 39,515,267 19,210,742
Cost incurred on
Capital advances 11,759,987 9,523,487
uncompleted contracts $62,885,237 $60,800,956
252,550,630 269,023,036
Estimated earnings 38,889,183 34,211,471 Less: Accumulated depreciation
101,774,420 95,012,426 and amortization (101,620,303) (121,391,139)
Less: Billings to date (77,111,436) (80,992,935) $150,930,327 $147,631,897

$24,662,984 $14,019,491 9.2 Depreciation and amortization on property, plant and

Included in the equipment and amortization of computer software included
accompanying in depreciation and amortization of property, plant and
equipment is as follows:
balance sheet under
Year ended December 31, 2007 2008 2009
the following captions:
Depreciation and
Unbilled revenue 30,663,367 19,737,311
amortization $22,965,130 $23,254,443 $22,004,791
Billings in excess of Amortisation of
costs and estimated computer software 4,796,933 4,432,496 4,246,801
earnings on uncompleted
Unamortized computer software cost as at December 31, 2008
contracts (6,000,383) (5,717,820) and 2009 amounted to $5,071,501 and $7,999,468 respectively.
$24,662,984 $14,019,491

> 143
 Notes to the Consolidated Financial Statements (Contd.)

10. Goodwill and Intangible Assets 10.4 Goodwill as of December 31, 2008 and 2009 has been allocated
10.1 Intangible assets as at December 31, 2008 and 2009 consist to the following reportable segments:
of the following: As of December 31, 2008 2009
As of December 31, 2008 2009 Segment
Customer related intangibles $14,037,795 $14,037,795 Financial services $2,594,374 $2,594,374
Technology related intangibles 497,879 497,879 Communication, Media
Intellectual property rights 21,448,600 21,448,600 and Entertainment 54,456,313 54,985,799
Foreign currency translation Manufacturing Services 8,258,358 8,258,358
adjustment (378,795) (310,371) Total $65,309,045 $65,838,531
35,605,479 35,673,903
11. Change in estimate
Less: Accumulated amortization (8,532,311) (12,779,112)
11.1 The US Internal Revenue Service ("IRS") completed its
$27,073,168 $22,894,791
assessment of tax returns for the years ended 2003 and 2004
During 2007, Patni, through its wholly owned subsidiary, of Patni Americas Inc. and for the years ended March 31,
Patni USA, acquired from one of its major customer, the 2003, 2004 and 2005 of the US branch of the Company in
worldwide rights for a software Proprietary Intellectual 2008, and completed its assessment of tax returns for the
Property Rights (“IPR”) that enables communication service years ended 2005 and 2006 of Patni Americas Inc in 2009.
providers to offer customer management, retail point-of-sale
Based on the completion of assessment of these years, the
and billing services for a variety of products and services. Cost
Company reviewed the adequacy of the previously established
of acquisition of the IPR amounting to $20,368,600 has been
tax exposure reserves with respect to these years and re-
capitalised as an intangible asset and is being amortised over
measured the established tax positions for the latter years
a period of ten years. The Company intends to use this
based on the experience gained from the tax examination.
intellectual property for the purposes of software licensing,
Accordingly, the following amounts have been included in
provision of reusable IP-led IT services, managed services and
the income statement for the fiscal year ended December 31,
provision of hosted or software-as-a-service solutions. A
2008 and 2009 as a change in estimate:
royalty of 5% is payable to seller on such sales.
As of December 31, 2008 2009
During 2009, due to adverse market conditions, the Company
reviewed the recoverability of the carrying amount of the IPR. Reduction of accrual
(1)
Based on the results of the recoverability test, the sum of the for payroll taxes ($2,769,567) ($1,157,726)
undiscounted cash flows of IPR expected to result from its use Reduction in interest
(2)
exceeded the carrying amount as at December 31, 2009. These expense (6,497,329) (1,616,046)
undiscounted future cash flows were revised from previous Increase in interest expense 560,507 –
(3)
periods to reflect current prevailing economic conditions. The Reduction in other expense (1,092,687) (231,545)
Company concluded that as the undiscounted cash flows Reduction in income taxes
expected to be received from the continuing use of IPR - current (12,496,744) (9,423,496)
exceeded its carrying value a comparison of the carrying value Increase in income taxes
of the asset to its fair value was not required. - deferred 4,112,604 1,109,509
10.2 Amortization for the years ended December 31, 2007, 2008 ($18,183,216) ($11,319,304)
and 2009 amounted to $2,087,930, $4,457,529 and 1) Included under cost of revenues
$4,246,801 respectively. The estimated amortization for the 2) Included under Interest expense reversed
intangible assets, for the next five years will be as follows: 3) Included under other income/expense
2010 2011 2012 2013 2014 11.2 During the year, the Company received a favorable order from
Amortisation 3,890,902 3,380,405 3,241,855 3,150,936 3,105,490 the Indian Income Tax Appellate Tribunal allowing the set off
10.3 The movement in goodwill balance is given below: of certain losses against business income. Based on this order
As of December 31, 2008 2009 the Company has reversed the tax provisions amounting to
Balance at beginning of the year $66,713,170 $65,309,045 $ 2,459,012.
Add : Tax paid upon final 12. Accrued expenses consist of the following:
settlement with tax authority
As of December 31, 2008 2009
pertaining to pre-acquisition period 350,310 -
Employee costs $32,214,120 36,989,133
(Less)/ Add: Exchange Difference (1,754,435) 529,486
Balance at end of the year $65,309,045 $65,838,531
Subcontractor accruals 5,502,961 4,548,981
Professional fees payable 2,432,067 2,240,854
Goodwill as of December 31, 2008 and 2009 includes
Others 16,017,949 12,505,792
$4,701,731 and $5,231,218 respectively, which is deductible for
$56,167,097 $56,284,760
tax purposes as per local taxation laws in the United Kingdom.

144 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

13. Other liabilities office space, that expire over the next 1-3 years. These
Other liabilities consist of the following: agreements provide for cancellation by either party with a
As of December 31, 2008 2009 notice period ranging from 30 days to 180 days, after the
Deferred revenue $3,387,715 $4,708,171 initial lock-in period, if any.
Provision for leave pay obligation 15,975,135 13,918,720 14.5 Future minimum lease payments under non-cancelable
Provision for retirement benefits 9,930,835 11,037,384 operating leases (with initial or remaining lease terms in
Capital expenditure payable 1,596,090 1,294,675 excess of one year) and future capital lease payments as of
Provision for payroll tax matters 1,520,559 362,833 December 31, 2009 are as follows:
Interest on corporate taxes and Capital Operating
other related expenses 2,337,601 1,862,782 leases leases
Provision for volume discounts 3,684,948 8,465,731 2010 $124,225 $6,517,952
Advance from customers 1,335,869 1,173,682 2011 72,532 3,613,773
Derivative liabilities 38,493,027 7,692,381 2012 21,139 2,396,909
Others 5,913,986 6,677,986 2013 3,227 2,201,019
$84,175,765 $57,194,255 beyond 2013 - 3,642,262
Less : Other Current liabilities Total minimum lease payments $221,123 $18,371,915
Deferred revenue (3,387,715) (4,708,171) Less: Amount representing interest (18,043)
Provision for leave pay obligation (15,975,135) (13,918,720) Present value of net minimum
Provision for retirement benefits (178,808) (177,706) capital lease payments 203,081
Capital expenditure payable (1,596,090) (1,294,675) Less: Current installments of
Provision for volume discounts (3,684,948) (8,465,731) obligations under capital leases (112,399)
Advance from customers (1,335,869) (1,173,682) Obligations under capital leases,
Derivative liabilities (27,695,752) - excluding current installments $90,681
Others (5,835,147) (6,243,402)
14.6 Rental expense for all operating leases for the years ended
(59,689,464) (35,982,086)
December 31, 2007, 2008 and 2009 was $14,291,084, $
Other liabilities $24,486,301 $21,212,169
14,777,332 and $12,377,644, respectively.
14. Leases
15. Fair Value Measurement
14.1 Patni acquires certain vehicles under capital lease for a non-
On January 1, 2008, the Company adopted ASC 820
cancelable period of 4 years. The gross amount recorded in
(previously FASB Statement No. 157 “Fair Value
property, plant and equipment for such capital leases and the
Measurements”). As a result, the Company now classifies its
related accumulated depreciation amounted to $896,255
inputs used to measure fair value into the following hierarchy:
and $539,392 as at December 31, 2008 and $590,972 and
$385,563 as at December 31, 2009, respectively. The Level 1: Unadjusted quoted market prices in active market.

depreciation expense in respect of these assets aggregated Level 2: Unadjusted quoted prices in active markets for
$347,542, $326,267 and $ 178,897 for the year ended similar assets or liabilities or Unadjusted quoted prices for
December 31, 2007, 2008 and 2009, respectively. identical or similar assets or liabilities in markets that are not

14.2 Patni USA has operating lease agreements, primarily for active or inputs other than quoted prices that are observable

leasing office space, that expire over the next 1-7 years. These for the asset or liability.

leases generally require Patni USA to pay certain executory Level 3: Unobservable inputs for the assets or liability.
costs such as taxes, maintenance and insurance. Patni UK has On January 1, 2008 the Company adopted the provisions of
operating lease agreement, for leasing office space, that ASC 825 (previously FASB Statement No. 159 “The Fair Value
expire over the next 9 years. Option for Financial Assets and Financial Liabilities”).
14.3 Patni has operating lease agreements, primarily for leasing Statement 159 gives the Company the irrevocable option to
office and residential premises. These agreements provide for report most financial assets and financial liabilities at fair
cancellation by either party with a notice period ranging from value on an instrument-by-instrument basis, with changes in
30 days to 120 days, after the initial lock-in period, if any. fair value reported in earnings. The Company has not elected
Some leases contain a clause for renewal of the lease the irrevocable option to report its financial assets and
agreements. Some leases provide for annual renewal of the financial liabilities at fair value.
lease payments. As of December 31, 2009, the fair value of the Company's
14.4 Patni Telecom and its subsidiaries have operating leases for financial assets and liabilities that are measured at fair value

> 145
 Notes to the Consolidated Financial Statements (Contd.)

on recurring basis, for each hierarchy level, is summarised in transaction, the forward contracts are highly effective in
the following table: hedging the cash flows of the Company’s inter-company and
Level 1 Level 2 Level 3 end customer receivables. These forward contracts also meet
Assets : the criteria for cash flow hedge accounting treatment and,
Liquid mutual funds - $357,178,269 - accordingly, part of revaluation gains or losses on these forward
Fixed maturity plan - 8,009,964 - contracts are included in other comprehensive income/(loss) and
Other investments 10,669,905 - -
are recognised in the consolidated statement of income based
Foreign currency
on occurrence of the underlying hedged transaction.
exchange derivatives - 2,400,791 -
Liabilities : For forward contracts designated as a cash flow hedge, the
Foreign currency exchange derivatives - 7,692,381 - hedge effectiveness is assessed based on changes in fair value
Investments attributable to changes in spot prices and accordingly, the
The Company’s investments consist primarily of investment in changes in the fair value of the contract related to the changes
debt linked mutual funds and certificates of deposit with in the difference between the spot price and the forward or
banks. Fair values for debt linked mutual funds are based on futures price would be excluded from assessment of hedge
prices as stated by the issuer's of mutual funds and are effectiveness and recognised in consolidated statements of
classified as Level 2. Fair values for certificates of deposit with income together with any ineffective portion of the hedge.
banks is based on prices obtained from independent third- For range forward contracts and contracts maturing beyond
party pricing services and are classified as Level 1. 18 month period and designated against forecasted
transactions, the hedge effectiveness is assessed based on
Derivative Financial Instruments
overall changes in fair value, and the revaluation gains and
The Company’s derivative financial instruments consist of
losses are recognised in Other Comprehensive Income, being
foreign currency forward exchange and option contracts. Fair
effective hedges. If it is determined that a derivative is not
values for derivative financial instruments are based on prices
highly effective as a hedge, or if a derivative ceases to be a
as provided by the banks and are classified as Level 2. The
highly effective hedge, the Company, prospectively,
prices are also obtained from independent third party dealers.
discontinues hedge accounting with respect to that derivative.
All of the significant inputs to the third-party valuation
models are observable in active markets. Inputs include At December 31, 2008 and 2009, the Company had
current market-based parameters such as forward rates, yield $30,012,023 of net losses related to cash flow hedges
curves and credit default swap pricing. deferred in accumulated other comprehensive income/(loss)
and $517,975 of net gains related to cash flow hedges
Assets and liabilities not measured at fair value
deferred in accumulated other comprehensive income/(loss).
The fair value of Company’s current assets and current
At December 31, 2009, $5,987,912 of deferred gains on
liabilities approximate their carrying values because of their
derivative instruments accumulated in other comprehensive
short-term maturity. Such financial instruments are classified
income are expected to be reclassified to earnings during the
as current and are expected to be liquidated within the next
next 12 months. There were no cash flow hedges which were
twelve months. The fair value of capital lease obligations has
discontinued during the period because of non-occurrence of
been estimated by discounting cash flows based on current
the forecasted transaction.
rate available to the Company for similar types of borrowing
arrangements. The fair value and carrying value of capital 16.2 The following table presents the aggregate contracted
lease obligations is set out below: principal amounts of the Company’s derivative contracts
Fair Carrying outstanding:
Value Value Currency 2008 2009

At December 31, 2008 $351,650 $359,955 Forward contracts, sell USD 285,436,000 309,584,551

At December 31, 2009 202,512 203,081 Forward contracts, sell JPY 400,000,000 875,000,000
Forward contracts, sell AUD 1,000,000 -
16. Derivatives financial instruments Forward contracts, sell GBP 1,500,000 2,938,000
16.1 The Company frequently enters into foreign currency forward Foreign currency written
and option contracts to hedge inter company and end options, sell GBP 900,000 -
customer receivables, both anticipated and firm commitments. Foreign currency written
These contracts are entered into to mitigate foreign currency options, sell EURO 1,600,000 -
risk caused by changes in exchange rates and are used to hedge Foreign currency written
these inter company and end customer receivables. options, sell JPY 150,000,000 -
At December 31, 2009, the Company’s foreign currency Foreign currency
contracts mature within one month upto forty one months. purchased options, sell USD 88,250,000 10,000,000
Since there is a direct relationship between the forward Foreign currency written
contracts and the currency denomination of the underlying options, net sell USD 21,000,000 -

146 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

The following table summarizes the location and amounts of Derivatives not designated as hedging instrument
our outstanding derivative instruments fair values in the Location of
consolidated balance sheets segregated by type of contract, by (Gain)/ Loss Amount of
assets and liabilities and by designation as of December 31, Recognised in (Gain)/ Loss
2009: Statement of Recognised
Location in Fair Income in income
Balance sheet value Foreign currency exchange Foreign exchange
Derivatives designated contracts (Note a) (gain)/loss, net ($1,445,738)
as hedging instrument
a) These foreign currency exchange contracts were entered
Foreign currency exchange Other Current
into to hedge the fluctuations in foreign exchange rates for
contracts assets $2,199,892
recognised balance sheet items such as inter company and
Foreign currency exchange Other liabilities 7,692,381
end customer receivables, and were not originally
contracts
designated as hedges. Realized (gains)/ losses and changes
Derivatives not designated
in the fair value of these derivatives are recorded in foreign
as hedging instrument
exchange (gains) losses, net in the consolidated statements
Foreign currency exchange Other Current $200,899
of income.
contracts assets

The following table summarizes the location and amount of gains and losses on derivative instrument in the consolidated stateme nts of
income segregated by type of contract and designation for the year ended December 31, 2009:
Derivatives Amount of Location of Amount of Location of (Gain)/ Amount of (Gain)/
in Cash Flow (Gains)/Loss (Gain)/ Loss (Gain)/ Loss Loss Recognised Loss Recognised
Hedging Recognised Reclassified Reclassified in Income on in income on
Relationship in OCI on from Accumulated from Accumulated Derivatives (Ineffective Derivative (Ineffective
Derivative OCI into Income OCI into Income portion and Amount portion and Amount
(Effective portion) (Effective portion) (Effective portion) Excluded from Excluded from
Effectiveness Testing) Effectiveness Testing)
Foreign currency ($12,330,273) Foreign exchange $18,199,724 Foreign exchange $1,006,930
exchange contracts (gain)/ loss, net (gain)/loss, net

The Company utilizes standard counterparty master agreements containing provisions for the netting of certain foreign currency
transaction obligations. The Company also mitigates the credit risk of these derivatives by transacting with highly rated count erparties in
India which are major banks. As of December 31, 2009, the Company has evaluated the credit and non-performance risks associated with
it's derivative counterparties, and believes that the impact of the credit risk associated with the outstanding derivatives was insignificant.

17. Shareholders’ equity rights. Under the depository agreement, the depository of ADSs
Common shares shall vote as directed by the Board of Directors of the Company.
17.1 The Company has only one class of equity shares. For all 17.3 In February 2008, the Board of Directors of the Company
matters submitted to vote in the shareholders’ meeting, every approved a proposal to repurchase fully paid equity shares
holder of equity shares (except holders of American Depository upto 10% of the paid up capital and free reserves, at a
Shares - ADSs), as reflected in the records of the Company maximum price of Rs. 325 per equity share, for an aggregate
shall have one vote in respect of each share held. In the event amount upto Rs. 2,370,000,000. In April 2008, necessary
of liquidation of the affairs of the Company, all preferential public announcements were made for buyback proposal
amounts, if any, shall be discharged by the Company. The which had been approved in accordance with the provisions of
remaining assets of the Company after such discharge shall be Section 77A, 77AA, 77B and other applicable provisions of the
distributed to the holders of equity shares in proportion to the Indian Companies Act, 1956 and the provisions of Securities
number of shares held by them. and Exchange Board of India (Buy-back of Securities)
17.2 In December 2005, pursuant to an Initial Public Offering of Regulations, 1998 (“Buy Back Regulations”).
American Depository Shares, the Company issued 6,156,250 17.4 In 2008, the Company repurchased a total of 10,957,082
ADSs (12,312,500 common shares) for a net proceeds of equity shares through the Bombay Stock Exchange and the
$117,021,852 (after adjusting for direct expenses relating to National Stock Exchange for an aggregate consideration of Rs.
ADSs of $8,196,274). The common shares represented by the 2,370,000,000 ($53,062,342) being 100% of the amount
ADSs are similar to other common shares except for voting authorised for buy back. Subsequently, the Company

> 147
 Notes to the Consolidated Financial Statements (Contd.)

extinguished such equity shares as per the requirements of 18.2 The weighted average grant date fair values of options
Section 77A of the Companies Act, 1956. granted during the year ended December 31, 2009 was $2.42
Retained earnings include profits aggregating Rs. 21,914,164 for equity linked options and $8.18 for ADR linked options.
($449,521) set aside as Capital Redemption Reserve as The weighted average grant date fair values of options
required by the Indian Companies Act, 1956 pursuant to the granted during the year ended December 31, 2008 was $2.29
repurchase which can be utilised only for the purpose of for equity linked options and $6.51 for ADR linked options.
issuing fully paid bonus shares of the Company. The weighted average grant date fair values of options
granted during the year ended December 31, 2007 was $ 3.58
17.5 Retained earnings as of December 31, 2008 and 2009 include
for equity linked options and $ 4.39 for ADR linked options.
profits aggregating $7,949,095 and $ 8,365,300, respectively,
which are not distributable as dividends under Indian 18.3 Stock options activity under the plan is as follows:
Companies Act, 1956 (Companies Act). Year ended December 31, 2008
Retained earnings and dividends Shares Exercise Weighted
17.6 The ability of Patni to declare and pay dividend under the arising out price average
Companies Act, is determined by its distributable profits as of options remaining
shown by its statutory accounts prepared in accordance with contractual
Indian GAAP. When Patni wishes to declare dividends, it is life (months)
required as per the Companies Act, to transfer upto 10% of its Outstanding at
net income (after the deduction of any accumulated deficit) the beginning of
computed in accordance with Companies Act to a general the year 583,826 $3.16 47
reserve before a dividend can be declared. Also, Indian law on 2,085,869 $5.51-$7.35 53
foreign exchange governs the remittance of dividends outside 2,466,055 $7.55 - $11.18 71
India. Granted during the
17.7 At December 31, 2008, the currency translation adjustment period (including
loss included in other comprehensive income/(loss) amounted 152,950 ADR
to $50,737,505. At December 31, 2009 the currency linked options) 596,000 $0.04 90
translation adjustment loss included in other comprehensive 350,000 $2.25 90
income/(loss) amounted to $23,034,979. 962,900 $7.55-$11.18 90
Forfeited during
18. Employee stock compensation plans the year (16,051) $3.16 –
18.1 On June 30 2003, Patni established the ‘Patni ESOP 2003’ plan (115,593) $5.51-$7.35 –
(‘the plan’). Under the plan, the Company is authorized to (569,929) $7.55-$11.18 –
issue up to 11,142,085 equity shares to eligible employees. Exercised during
Employees covered by the Plan are granted an option, which the year (42,250) $3.16 –
may be based on service or performance criteria, to purchase Outstanding at the
shares of the Company subject to the requirements of vesting. end of the year 596,000 $0.04 89
The options vest in a graded manner over four years with 25% 350,000 $2.25 89
of the options vesting at the end of each year and expire at the 525,525 $3.16 35
end of five years from the date of vesting. The Stock based 1,970,276 $5.51-$7.35 41
compensation expense is recognised over the vesting term of 2,859,026 $7.55-$11.18 59
each separately vesting portion of an award. A compensation Exercisable at the
committee constituted by the Board of Directors of the end of the year 525,525 $3.16 35
Company administers the plan. The plan has been amended to 1,885,276 $5.51-$7.35 40
enable the Company to issue up to 2,000,000 ADR linked 1,261,219 $7.55-$ 10.93 37
options (wherein one ADR linked option is equal to two equity Vested and
shares) to the employees of the Company as well as its expected to vest 596,000 $0.04 89
subsidiaries and hence “Patni ESOP 2003- Revised 2006” has 350,000 $2.25 89
come into force with effect from June 21, 2006. 525,525 $3.16 35
In June 2009, at the Annual General Meeting the 1,970,276 $5.51-$7.35 41
shareholders authorised the Company to issue additional 2,819,546 $7.55-$11.18 58
8,000,000 equity shares to eligible employees under the "Patni
ESOP 2003 - Revised 2008"plan.

148 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

18.3 Stock options activity under the plan is as follows: (Contd...) 18.4 The fair value of each option is estimated on the date of grant
using the Black-Scholes model with the following assumptions
Year ended December 31, 2009
for the equity linked options.
Shares Exercise Weighted
Year ended December 31, 2007 2008 2009
arising out price average
of options remaining Dividend yield 0.78% 0.68%-1.09% 1.37%-1.78%

contractual Weighted average dividend yield 0.78% 0.93% 1.53%

life (months) Expected life 3.5-6.5 years 3.5-6.5 years 3.5-6.5 years

Outstanding at Risk free interest rates 8.00%-8.22% 7.10%-7.37% 5.94%-7.21%

the beginning Volatility 32.84%-42.32% 33.01%-39.45% 37.01%-44.16%

of the year 596,000 $0.04 89 Weighted Average volatility 36.68% 37.35% 39.42%

350,000 $2.25 89 18.5 The fair value of each option is estimated on the date of grant
525,525 $3.16 35 using the Black-Scholes model with the following assumptions
1,970,276 $5.51-$7.35 41 for ADR linked options.
2,859,026 $7.55-$11.18 59 Year ended December 31, 2007 2008 2009
Granted during the Dividend yield 0.65% - 0.79% 0.68% 1.18%-1.64%
period (including Weighted average dividend yield 0.76% 0.68% 1.61%
413,905 ADR Expected life 3.5-6.5 years 3.5-6.5 years 1.0-6.5 years
linked options) 1,830,700 $0.04 76 Risk free interest rates 4.25%-4.75% 3.04%-3.51% 0.52%-2.96%
1,540,000 $2.05-$2.75 90 Volatility 34.32%-44.07% 41.36%-44.76% 42.41%-50.79%
499,600 $7.55-$11.18 90 Weighted average volatility 39% 43% 46.65%
Forfeited during
18.6 The aggregate intrinsic value of options exercised and fair
the year (54,800) $0.04 -
value of options vested is as follows:
(35,145) $3.16 -
As of December 31, 2007 2008 2009
(146,100) $5.51-$7.35 -
(40,000) $2.05-$2.75 - Intrinsic value of
(450,900) $7.55-$11.18 - options exercised $4,160,153 $119,815 $4,160,884
Exercised during Fair value of
the year* (125,000) $0.04 options vested 4,850,500 5,267,840 2,827,133
(76,000) $2.05-$2.75 18.7 The intrinsic value of options outstanding, exercisable, vested
(212,705) $3.16 - and expected to vest is as follows:
(258,275) $5.51-$7.35 - As of December 31, 2008 2009
(387,625) $7.55-$11.18 - Options outstanding $1,681,499 $53,366,201
Outstanding at the Options exercisable - 9,179,611
end of the year 2,246,900 $0.04 72 Options vested and
1,774,000 $2.05 -$2.75 80 expected to vest 1,681,499 52,351,739
277,675 $3.16 24
18.8 The compensation expense recognised as cost of revenues and
1,565,901 $5.51-$7.35 29
selling, general and administrative expense is as follows:
2,520,101 $7.55-$11.18 60
As of December 31, 2007 2008 2009
Exercisable at the
Cost of Revenues $1,832,101 $1,526,983 $1,571,630
end of the year 24,000 $0.04 59
Selling, general and
11,500 $2.05 -$2.75 59
administrative expenses 2,841,180 2,370,227 3,736,975
277,675 $3.16 24
1,523,401 $5.51-$7.35 27 18.9 The simplified method is used to estimate the expected term
1,232,519 $7.55-$11.18 42 of the instruments in the option valuation model which is
Vested and based on the vesting term and contractual term of the option
expected to Vest 2,153,630 $0.04 72 as the Company does not have sufficient historical data on
1,774,000 $2.05- $2.75 80 option exercise.
277,675 $3.16 24
18.10 As on December 31, 2009, the total compensation cost
1,565,901 $5.51-$7.35 29
related to non-vested awards not yet recognised is $7,803,286
2,520,101 $7.55-$11.18 60
and the weighted average period over which it is expected to
* Includes 38,580 options exercised in December 2009 for be recognised is 17 months.
which shares have not yet been allotted.

> 149
 Notes to the Consolidated Financial Statements (Contd.)

19. Income Tax 19.3 The tax effect of temporary differences that give rise to
19.1 Total income tax expense for the year ended December 31, significant portion of deferred tax assets and liabilities are
2007, 2008 and 2009 were allocated as follows: presented below:
Year ended December 31, 2007 2008 2009 2008 2009
Deferred tax assets:
Income from operations $21,783,963 $5,203,401 $4,758,887
Leave pay obligation, Accrued
Shareholders' equity, for
Incentives, Pension obligations, etc $13,007,057 $12,534,005
- unrealized holding
Accounts receivable 577,542 988,216
gain/loss on investment
Deferred revenue 183,890 506,774
securities (424,845) (257,690) (301,521)
Carry forward business and other losses 2,822,999 4,862,055
- unrealized losses on
Payroll taxes and interest on payroll
derivative instruments - (2,201,998) (20,446)
and corporate taxes 2,026,936 931,668
- pension 118,638 107,142 (181,797)
ESOP compensation costs 2,095,365 2,193,300
- gratuity (71,454) 88,655 14,274
Others 107,091 205,000
- tax benefit arising on
Unrealised loss on derivatives 2,201,998 2,222,444
exercise of stock options (442,165) (16,121) (814,537)
Billings in excess of costs and
Goodwill and intangible
estimated earnings in excess of
assets (235,057) 350,310 -
billings on uncompleted contracts 121,440 59,059
Total $20,729,081 $3,273,698 $3,454,860
Mat Credit Entitlement (1) 12,962,034 23,023,086
19.2 Income tax expense attributable to income from continuing Gross deferred assets 36,106,352 47,525,607
operations consists of the following: Less: Valuation allowance - (3,600,737)
Year ended December 31, 2007 2008 2009 Total deferred tax assets $36,106,352 $43,924,870
Current taxes Deferred tax liabilities:
Domestic $9,186,360 $10,376,924 $14,091,575 Property, plant and equipment (1,124,579) (1,363,190)
Foreign 22,727,637 4,042,442 (467,451) Undistributed earnings of US branch (3,517,525) (1,809,554)
31,913,997 14,419,366 13,624,124 Unrealised gain on available for
Deferred taxes sale securities (847,410) (542,884)
Domestic (5,731,246) (9,562,995) (9,063,137) Intangible assets (2,877,255) (1,930,391)
Foreign (4,398,789) 347,030 197,900 Tax deduction available for
(10,130,035) (9,215,965) (8,865,237) notional interest deduction (499,851) (499,850)
Total $21,783,963 $5,203,401 $4,758,887 Tax deductible Goodwill (477,296) (732,371)
Total deferred tax liabilities (9,343,916) (6,878,240)
Pre-tax income from domestic and foreign operations is set
Net Deferred tax assets $26,762,436 $37,046,630
out below:
Classified as
Year ended December 31, 2007 2008 2009 Deferred tax assets
Pre-tax income Current $9,796,021 $9,418,969
Domestic $94,707,850 $79,583,951 $98,086,457 Non current 19,825,211 28,732,581
Foreign 41,051,607 27,040,695 26,452,194 Deferred tax liabilities
Total $135,759,457 $106,624,646 $124,538,652 Non current 2,858,796 1,104,920
Net Deferred tax assets $26,762,436 $37,046,630

1) Pursuant to the changes in the Indian income tax laws,

Minimum Alternate Tax (MAT) has been extended to
income in respect of which deduction is claimed under
section 10A. Consequently, the Company have calculated
the tax liability for current domestic taxes after considering
MAT. The excess tax paid under MAT provisions over and
above normal tax liability can be carried forward and set-
off against future tax liabilities computed under normal tax
provisions. The Company was required to pay MAT during
fiscal 2007, 2008 and 2009, accordingly, a deferred tax

150 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

asset of $5,984,362, $7,475,743 and $9,439,700 has operations before income-taxes as a result of the following:
been recognised during fiscal year December 31, 2007, Year ended December 31, 2007 2008 2009
2008 and 2009 respectively, which can be carried forward Income before
for a period of 10 years. income taxes $135,759,457 $106,624,646 $124,538,652
Weighted average
19.4 In assessing the realisability of deferred tax assets, enacted tax rate in India 33.91% 33.99% 33.99%
management considers whether it is more likely than not, that Computed expected
some portion, or all, of the deferred tax assets will not be income tax expense $46,032,638 $36,241,717 $42,330,688
realised. The ultimate realisation of deferred tax assets is Effect of:
dependent upon the generation of future taxable income Income exempt from tax (32,290,707) (31,274,645) (30,673,751)
during the periods in which the temporary differences and loss Changes in valuation

carryforwards are deductible. Management considers the allowance 370,305 (501,719) 3,600,737
Carry forward losses on
reversal of taxable temporary differences, the projected future
long term capital loss – – (411,810)
taxable income, tax planning strategies and impact of tax
Non deductible expenses 792,881 2,837,440 2,002,506
exemptions currently available to the Company, in making this
US State taxes, net of
assessment. Based on the level of expected taxable incomes federal tax benefit 1,407,693 761,085 1,021,285
over the periods in which the deferred tax assets are Branch taxes 8,162,897 10,393,012 9,733,131
deductible, management believes that it is more likely than Reversal of the uncertain
not, the Company will realise the benefits of those deductible tax positions due to the
differences, net of existing valuation allowances. Taxable expiration of the statute

income for the years 2007, 2008 and 2009 aggregated $ of limitation – – (7,629,429)
Foreign income taxed
34,905,541, $35,969,214 and $57,279,749, respectively.
at different rates 194,339 921,930 649,042
The operating loss of the subsidiaries in the UK amounting to Change in statutory tax
$11,521,259 can be carried forward for an indefinite period rate on deferred taxes (22,301) – –
and the operating loss of the subsidiaries in the US amounting Profit on sale of

to $ 1,023,204 will expire at various dates through December investments taxed at

other than statutory rate (2,047,266) (3,076,104) (3,092,519)
31, 2029. The loss pertaining to subsidiary in Mexico
Change to prior year
amounting to $762,999 can be carried forward for ten years
tax expense estimates – (12,496,744) (9,423,496)
and pertaining to subsidiary in Singapore amounting to
Reversal of prior year tax – – (3,452,757)
$1,026,647 can be carried forward for indefinite period. Others (816,516) 1,397,430 105,260
Reported income
19.5 Deferred tax liability in respect of undistributed earnings of
tax expenses $21,783,963 $5,203,401 $4,758,887
Patni’s foreign subsidiaries as of 2009 aggregating $
19,682,206, has not been recognised in the financial 19.8 The Finance Act,2009 has extended the availability of the 10-
year income tax holiday by a period of one year such that the
statements, as such earnings are considered to be indefinitely
tax holiday will be available until the earlier of fiscal year
re-invested. As of December 31, 2009, the undistributed
ending March 31, 2011 or 10 years after the commencement
earnings of these subsidiaries were approximately $
of a Company’s undertaking.
57,905,875.
19.9 A substantial portion of profits of the group’s India operations
19.6 The net change in valuation allowance in the year 2009 is is exempt from Indian income tax, being profit from
mainly on account of creation of valuation allowance against undertakings situated at Software Technology Parks. Under
the tax holiday, the tax payer can utilize exemption of profits
deferred tax asset recorded on business loss carryforwards for
from income taxes for a period of ten consecutive years. The
subsidiaries in UK, Mexico and Singapore amounting to $
Company has opted for this exemption for undertakings
2,493,581, $218,551 and $185,248, respectively.
situated in Software Technology Parks and these exemptions
Additionally, the Company has set up a valuation allowance expire on various dates between years 2005 and 2011. The
on deferred tax asset recorded on long term capital loss arising aggregate effect on net income of the tax holiday and export
on investment in available for sale securities amounting to incentive scheme were $28,931,047, $27,312,225 and
$703,357. $27,145,852 for 2007, 2008 and 2009 respectively. Further,
the per share effect of this exemption on net income was
19.7 The reported income tax expense attributable to income from
$0.20, $0.20, $0.21 for 2007, 2008 and 2009 respectively.
continuing operations differed from amounts computed by
19.10 The Company conducts its business globally, and, as a result,
applying the enacted tax rate to income from continuing the Company and some of its subsidiaries file income tax

> 151
 Notes to the Consolidated Financial Statements (Contd.)

returns in India, the U.S., and various foreign jurisdictions. The provides for gratuity, a defined retirement plan covering all
tax years ended March 31, 2000 to March 31, 2009 remain employees. The plan provides a lump sum payment to vested
open to examination by the Indian tax authorities. With few employees at retirement or termination of employment based
exceptions, the Company is no longer subject to U.S. federal, on the respective employee’s defined portion of last salary and
state and local, or non-U.S. income tax examinations by tax the years of employment with the Company.
authorities for years before 2005 with regard to the 20.2 Patni contributes each year to a gratuity fund based upon
Company's US branch and before 2007, with regard to Patni actuarial valuations performed by an actuary. The fund is
Americas Inc. The Internal Revenue Service (IRS) concluded an administered by Patni through a trust set up for the purpose.
examination of the Company’s U.S. income tax returns of Patni All assets of the plan are owned by the trust and comprise of
Americas Inc for 2005 and 2006 in the third quarter of 2009. investment in government securities, government securities
A reconciliation of the beginning and ending amount of based mutual funds and other securities.
unrecognized tax benefits is as follows: 20.3 With regard to Patni India and Patni Telecom India's (formerly
Year ended December 31, 2007 2008 2009 known as Cymbal Information Services Pvt. Ltd.) Gratuity Plan,
Current taxes the following table sets forth the plan’s funded status and
Beginning Balance 41,701,814 49,333,633 45,871,569 amounts recognised in the Company’s consolidated balance
Additions based on tax sheets. Measurement dates used to measure fair value of plan
positions related to 2009 7,631,819 9,076,827 8,355,426 assets and benefit obligation is December 31.
Additions for tax positions At December 31, 2008 2009
of prior years - 6,251,572 - Change in benefit obligation
(Settlement)/Refund - 1,211,383 (201,516) Projected benefit obligation (“PBO”)
Reductions for tax at January 1, $6,308,260 $5,312,302
positions of prior years - (19,049,718) (13,675,197) Service cost 1,094,495 953,489
Reductions for tax Interest cost 552,411 503,480
positions due to lapse Translation loss/(gain) (1,382,756) 311,964
of statute of limitation - - (8,222,392) Actuarial loss/(gain) (678,102) (62,898)
Exchange difference - (952,128) 243,524 Benefits paid (582,006) (525,304)
Ending Balance 49,333,633 45,871,569 32,371,414 PBO at December 31, 5,312,302 6,493,033
The Company recognizes interest and penalties related to Fair value of plan assets as at January 1, 5,798,553 4,577,156
uncertain tax positions in other (expense)/ income. During Actual return on plan assets 468,515 301,786
year ended December 31, 2009, the Company reversed Employer contributions 3,037 1,251,963
interest and penalties of $1,974,745 mainly on account of Benefits paid (582,005) (525,304)
reversal of $1,847,592 arising on account of completion of Translation gain/(loss) (1,110,944) 268,569
assessment with IRS for years 2005 and 2006 for Patni Plan assets at December 31, 4,577,156 5,874,171
Americas Inc and $1,191,530 on account of expiry of statute Funded status (735,146) (618,862)
of limitation with regard to it's US Branch for the year ended Accumulated benefit obligation 4,132,787 5,268,278
March 2006. During the year ended December 31, 2008, the Amounts recognised in the consolidated
Company recognised a reversal of previously recognised balance sheets consists of:
interest expense of $5,448,920 mainly on account of a credit Provision for Gratuity (included in '
of $7,590,016 arising on account of settlement with IRS for other current liabilities') 25,395 46,324
years 2003 and 2004 for Patni Inc and for the years ended Provision for Gratuity (included
March 2003, 2004 and 2005 for US Branch. As of December in 'other liabilities') 709,751 572,538
31, 2009 and 2008, the Company has $1,797,349 and $735,146 $618,862
$3,815,375, respectively as accrued interest and penalties 20.4 Key weighted average assumptions used to determine the
related to uncertain tax positions. benefit obligation were as follows:
As of December 31, 2009 the Company had $29,894,680 of 2008 2009
net unrecognized tax benefits arising out of tax positions Discount rate 9.00% 7.45%
which would affect the effective tax rate if recognised. For the actuarial valuation at December 31, 2008 compensation
Although it is difficult to anticipate the final outcome on levels have been assumed to increase at 8% per annum for the
timing of resolution of any particular uncertain tax position, first three years, and 7% per annum thereafter. For the actuarial
the Company believes that the total amount of unrecognized valuation at December 31, 2009 compensation levels have been
tax benefits will be decreased by $6,735,221 during the next assumed to increase at 6% per annum.
12 months due to expiry of statute of limitation. The expected rate of return on assets in future is considered to be
20 Retirement benefits to employees 7.5%. This is based on the expectation of the average long-term
Gratuity benefits rate of return to prevail over the next 15 to 20 years on the type of
20.1 In accordance with the Payment of Gratuity Act, 1972, Patni investments prescribed as per the statutory pattern of investments.

152 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

20.5 The composition of plan assets is detailed below: benefits upon retirement or on termination from employment
As of December 31, 2008 % 2009 % at the rate of 50% of their last drawn monthly salary. The
Central Government pension is payable from the time the eligible director reaches
Securities 126,000 3% 65,380 1% the age of sixty five in respect of Founder directors of Patni
Investment in India and seventy one in respect of Executive director in
Government Securities employment with Patni USA, and is payable to the directors
based funds 3,364,745 73% 4,316,604 73% or the surviving spouse. The liabilities for these pension plans
Public Sector/Financial are actuarially determined and periodically recognised. These
Institutions/Bank bonds 1,086,411 24% 1,492,186 25% plans are not funded.
Total 4,577,156 100 5,874,171 100 20.10 With regard to Patni India pension plans, the following table
Fair values for government securities linked mutual funds are sets forth the plan’s funded status and amounts recognised in
based on prices as stated by the issuer's of mutual funds and the Company’s consolidated balance sheet. Measurement
are classified as Level 2. Fair values for investment in central dates used to measure benefit obligation is December 31 for
government securities is based on prices obtained from each fiscal year.
independent third-party pricing services and are classified as As at December 31, 2008 2009
Level 2. Change in benefit obligation
20.6 Net periodic gratuity cost included the following components: PBO at January 1, $2,310,023 $1,922,687
Year ended December 31, 2007 2008 2009 Service cost – –
Service cost $1,091,201 $1,094,495 $953,489 Interest cost 181,491 168,928
Interest cost 401,351 552,411 503,480 Translation loss/(gain) (446,918) 93,799
Expected return on assets (416,245) (365,565) (332,202) Actuarial loss/(gain) 18,133 352,623
Amortization of actuarial Benefits paid (140,042) (126,515)
(gain)/loss (920) 137,128 (10,711) PBO at December 31, 1,922,687 2,411,522
Net gratuity cost $1,075,387 $1,418,469 $1,114,055 Funded status (1,922,687) (2,411,522)
Accumulated benefit obligation $1,922,687 $2,411,522
20.7 Key weighted average assumptions used to determine the net
periodic gratuity cost were as follows: 20.11 Key weighted average assumptions used to determine benefit
obligation for Patni India pension plan were as follows:
2007 2008 2009
Year ended December 31, 2008 2009
Discount rate 8.85% 9.00% 7.45%
Discount rate 9.00% 7.45%
Expected return on assets 7.50% 7.50% 7.50%
Increase in compensation levels 0% 0%
For the actuarial valuation at December 31, 2009
20.12 Net periodic pension cost of Patni India pension plan included
compensation levels have been assumed to increase at 6% per
the following components:
annum. For the actuarial valuation at December 31, 2008
compensation levels have been assumed to increase at 8% per Year ended December 31, 2007 2008 2009
annum for the first three years, and 7% per annum thereafter. Service cost $71,175 - -
Interest cost 181,987 181,491 168,928
20.8 Patni's expected contribution to gratuity fund for the calendar
Amortization – – –
year 2010 is $1,121,131. The expected benefit payments for
Net pension cost $253,162 $181,491 $168,928
next ten years are as follows:
Expected benefit payments 20.13 Key weighted average assumptions used to determine net
2010 $1,655,439 periodic pension cost for the Patni India pension plan were as
2011 $1,674,613 follows:
2012 $1,725,795 Year ended December 31, 2007 2008 2009
2013 $1,687,640 Discount rate 8.85% 9.00% 7.45%
2014 $1,541,595 Rate of compensation
2015 - 2019 $5,048,517 increase 10.00% 0.00% 0.00%
At December 31, 2008 and 2009, the pre tax amounts in 20.14 Patni's expected payment for the calendar year 2010 is
accumulated other comprehensive income / (loss), not yet $131,384. The expected benefit payments for next ten years
recognised as a component of net periodic gratuity costs are as follows:
consists of actuarial gain of $23,977 and $33,407,
Expected benefit payments
respectively. The estimated actuarial gain that will be
2010 $131,384
amortised from other comprehensive income /(loss) in net
2011 $131,384
periodic gratuity cost in fiscal 2010 is $Nil.
2012 $131,384
Pension benefits 2013 $131,384
20.9 Founder directors of Patni India and Executive director in 2014 131,384
employment with Patni USA are entitled to receive pension 2015 – 2019 $1,116,767

> 153
 Notes to the Consolidated Financial Statements (Contd.)

20.15 With regard to Patni USA pension plan, the following table 21 Segment Information
sets forth the plan’s funded status and amounts recognised in 21.1 The Company’s operations relate to providing IT services and
the Company’s consolidated balance sheet. Measurement solutions, delivered to customers operating in various industry
dates used to make up benefit obligation is December 31 for segments. Accordingly, revenues represented along industry
each fiscal year. classes comprise the principal basis of segmental information
As at December 31, 2008 2009 set out in these condensed consolidated financial statements.
Change in benefit obligation Secondary segmental reporting is performed on the basis of
PBO at January 1, $7,093,885 $7,273,000 the geographical location of the customers. The accounting
Service cost 200,000 201,000 policies consistently used in the preparation of the
Interest cost 318,000 336,000 consolidated financial statements are also consistently applied
Actuarial loss/ (Gain) (338,885) 197,000 to individual segment information.
PBO at December 31, 7,273,000 8,007,000 21.2 Industry segments of the Company comprise financial services,
Funded status (7,273,000) (8,007,000) insurance services, manufacturing, retail and distribution
Accumulated benefit obligation $4,516,000 $5,469,000 companies, communications, media and utilities, and
20.16 Key weighted average assumptions used to determine benefit technology practice (comprising of product engineering). The
obligation for Patni USA pension plan were as follows: Company evaluates segment performance and allocates
resources based on revenue growth. Revenue in relation to
Year ended December 31, 2008 2009
segments is categorised based on items that are individually
Discount rate (per annum) 4.5% 4.5%
identifiable to that segment. Costs are not specifically allocable
Increase in compensation levels (per annum) 10% 10%
to individual segment as the underlying resources and services
20.17 Net periodic pension cost of Patni USA pension plan included
are used interchangeably. Property, plant and equipment used
the following components:
in the Company’s business or liabilities contracted have not
Year ended December 31, 2007 2008 2009 been identified to any of the reportable segments, as the
Service cost $191,148 $200,000 $201,000 property, plant and equipment and services are used
Interest cost 327,036 318,000 336,000 interchangeably between segments.
Amortization 44,169 - -
21.3 From January 1, 2009, retail, logistics and transportation
Net pension cost $562,353 $518,000 $537,000
segment (previously included under "Others" in the Company's
20.18 Key weighted average assumptions used to determine net segment information disclosures) has been merged with the
periodic pension cost for the Patni USA pension plan were as manufacturing industry practice (now renamed as
follows: Manufacturing, Retail and Distribution). This integration of
Year ended December 31, 2007 2008 2009 industry practices is mainly due to similar service offerings, as
Discount rate 5.0% per 4.5% per 4.5% per both require large ERP (Enterprise Resource Planning)
annum annum annum implementation with significant work towards supply chain
Rate of compensation 10% per 10% per 10% per management. Further, energy and utilities segment (previously
increase annum annum annum included under "Others" in the Company's segment
information disclosures) has been merged with the
20.19 At December 31, 2008 and 2009, the pre tax amounts in
Communications, Media and Entertainment industry practice
accumulated other comprehensive income / (loss), not yet
(now renamed as Communications, Media and Utilities) as the
recognized as a component of net periodic pension costs
BSS (Business Support Systems) platform is commonly used in
consists of actuarial loss of ($168,616) and ($713,580)
case of these industry practices.
respectively The estimated actuarial gain that will be amortised
from other comprehensive income /(loss) in net periodic 21.4 Patni’s geographic segmentation is based on location of
pension cost in fiscal 2010 is $Nil. customers and comprises United States of America (‘USA’),
Europe, Japan, India and Others. Revenue in relation to
Provident fund
geographic segments is categorised based on the location of
20.20 All employees of Patni India and Patni Telecom India receive
the specific customer entity for which services are performed
provident fund benefits through a defined contribution plan in
irrespective of the customer entity that is billed for the services
which both the employee and employer make monthly
and whether the services are delivered onsite or offshore.
contributions to the plan at 12% each of the covered
Categorisation of customer related assets and liabilities in
employee’s defined portion of salary. The Company has no
relation to geographic segments is based on the location of
further obligations under the plan beyond monthly
the specific customer entity which is billed for the services.
contribution. Patni contributes to the Provident Fund Plan
21.5 Substantial portion of Patni's long lived assets are located in
maintained by the Government of India.
India.
20.21 Patni contributed $ 4,145,932, $ 4,251,292 and $4,151,565
to the Provident Fund Plan in 2007, 2008 and 2009,
respectively.

154 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

20.6 Industry segments (Amount in US$)

Particulars Financial Insurance Manufacturing, Communication, Product Total

Services Retail and Media & Engineering
Distribution Utilities
December 31, 2007
Net revenues $93,725,976 $156,608,255 $178,640,176 $121,066,028 $112,871,234 $662,911,669
Accounts receivables, net 19,075,343 27,515,894 41,706,192 26,135,278 21,938,976 $136,371,683
Billings in excess of cost and
estimated earnings on
uncompleted contracts (322,417) (337,306) (1,563,771) (559,047) (772,704) ($3,555,245)
Advance from customers (189,649) (400,875) (274,449) (83,909) (288,355) ($1,237,237)
Unbilled revenue 3,644,377 1,907,851 10,657,806 9,932,670 6,274,687 $32,417,391
December 31, 2008
Net revenues $91,673,353 $177,274,553 $207,659,685 $129,030,389 $113,246,123 $718,884,103
Accounts receivables, net 14,749,219 25,412,923 33,085,786 22,658,292 15,907,523 $111,813,743
Billings in excess of cost and
estimated earnings on
uncompleted contracts (1,043,777) (223,984) (2,030,463) (1,008,800) (1,693,359) ($6,000,383)
Advance from customers (85,646) (50,311) (455,801) (58,780) (685,331) ($1,335,869)
Unbilled revenue 3,110,598 2,162,504 8,127,184 12,711,210 4,551,871 $30,663,367
December 31, 2009
Net revenues $84,151,975 $195,114,394 $190,215,320 $88,347,870 $98,088,562 $655,918,121
Accounts receivables, net 13,477,359 25,223,137 39,713,407 17,034,240 13,961,443 $109,409,586
Billings in excess of cost and
estimated earnings on
uncompleted contracts (263,957) (301,076) (2,467,272) (999,385) (1,686,130) ($5,717,820)
Advance from customers (327,657) (55,428) (463,250) (246,895) (80,452) ($1,173,682)
Unbilled revenue 2,250,394 2,577,881 6,975,234 5,422,872 2,510,930 $19,737,311

20.7 Geographic segments (Amount in US$)

Particulars USA Europe Japan India Others Total
December 31, 2007
Net revenues $516,438,299 $97,712,926 $20,044,614 $5,376,202 $23,339,628 $662,911,669
Accounts receivables, net 100,096,293 28,257,749 2,915,162 1,245,098 3,857,381 $136,371,683
Billings in excess of cost and estimated
earnings on uncompleted contracts (1,833,086) (624,628) (839,150) (172,146) (86,235) ($3,555,245)
Advance from customers (1,054,657) (98,860) (73,768) (9,952) - ($1,237,237)
Unbilled revenue 19,824,710 8,047,805 1,894,379 268,574 2,381,923 $32,417,391
December 31, 2008
Net revenues $545,440,929 $112,640,874 $25,039,034 $6,426,537 $29,336,729 $718,884,103
Accounts receivables, net 84,479,242 18,910,013 3,289,297 1,962,387 3,172,804 $111,813,743
Billings in excess of cost and estimated
earnings on uncompleted contracts (3,122,673) (186,880) (1,528,806) (55,839) (1,106,185) ($6,000,383)
Advance from customers (687,186) (71,776) (507,529) (8,242) (61,136) ($1,335,869)
Unbilled revenue 14,773,659 11,387,849 1,144,701 858,273 2,498,885 $30,663,367
December 31, 2009
Net revenues $517,254,514 $83,476,935 $23,205,669 $6,760,695 $25,220,308 $655,918,121
Accounts receivables, net 89,143,096 14,287,050 1,898,097 1,566,291 2,515,052 $109,409,586
Billings in excess of cost and estimated
earnings on uncompleted contracts (2,861,588) (826,062) (1,588,626) (52,070) (389,474) ($5,717,820)
Advance from customers (756,813) (321,255) (47,010) (12,213) (36,391) ($1,173,682)
Unbilled revenue 11,362,487 4,910,420 464,171 524,069 2,476,164 $19,737,311

> 155
 Notes to the Consolidated Financial Statements (Contd.)

20.8 One customer accounted for 12%, 11% and 10% of the total Further, an amount of $457,436 and $359,523 has been
revenues for the year ended December 31, 2007, 2008 and recorded as commissions for these two directors (included in
2009, respectively. Net receivables from this customer as at selling, general and administrative expenses) for the year
December 31, 2008 and 2009, amounted to 8% and 15% of ended December 31, 2008 and 2009, respectively.
the total net receivables, respectively. The revenues from this
The Company has recorded sales transactions with General
customer were across all the industry segments of the
Atlantic Mauritius Limited (GAML). Revenues of $ 100,726,
Company. Another customer in the Insurance industry
$456,729 and $417,220 were recorded, for the year ended
segment accounted for 9%, 10% and 12% of the total
December 31, 2007, 2008 and 2009 respectively. Accounts
revenues for the years ended December 31, 2007, 2008 and
receivable due from GAML at December 31, 2008 and 2009
2009, respectively. Net receivables for this customer as at
were $98,131 and $67,842 respectively.
December 31, 2008 and 2009, amounted to 6% and 6% of
the total net receivables, respectively. Expenses
23.2 Patni has taken certain residential properties under operating
22 Earnings per share
leases from certain affiliates and the Patni family. The rentals
A reconciliation of the common shares used in the computation
and other incidental charges incurred were $93,725, $82,036
of basic and diluted earnings per share is set out below:
and $75,061 for the years ended December 31, 2007, 2008
Year ended December 31, 2007 2008 2009
and 2009, respectively. Amounts payable with respect to
Common shares
these obligations as at December 31, 2008 and 2009 were
Weighted average
$24,909 and $48,616, respectively. Outstanding security
number of shares
deposits under the operating leases placed by Patni with
outstanding 138,660,785 135,590,677 128,254,916
affiliates and the Patni family at December 31, 2008 and
Effect of dilutive
2009 were $35,857 and $37,576, respectively.
equivalent shares-stock
options outstanding 909,148 169,745 1,986,169 Due from employees
Weighted average 23.3 Patni grants personal loans to eligible employees, either for
number of equity housing or personal purposes and advances to meet initial
shares and dilutive conveyance and living expenses while on travel. Personal
equivalent shares loans include loans for vehicle purchase and other individual
outstanding 139,569,933 135,760,422 130,241,085 employee needs. Such loans and advances are repayable in
equal installments over periods ranging from 1–60 months.
Options to purchase 1,992,055, 5,704,527 and 9,80,600
Interest on these loans and advances is charged at 0- 9%.
equity shares were outstanding during the year ended
Loans outstanding at December 31, 2008 and 2009 were $
December 31, 2007, 2008 and 2009, respectively, but were
$450,472 and $ 108,383, respectively.
not included in the computation of diluted earnings per share
because the exercise price of the options was greater than the 23.4 Patni USA, Patni UK, Patni GmbH, Patni Telecom and its
average market price of the equity shares. subsidiaries grant personal loans to employees as well as
advances to meet initial conveyance and living expenses while
23 Related party transactions
on travel. Such loans and advances are repayable over a
23.1 Patni enters into various transactions with related parties,
period of 6 months. Interest charged on these loans and
such as PCS Technology Ltd. (‘PCSTL’), formerly known as PCS
advances ranged from 0% to 10%. Balance outstanding of
Industries Ltd., General Atlantic Mauritius Limited, PCS
such loans and advances at December 31, 2008 and 2009
Cullinet, PCS Finance, Ravi and Ashok Enterprises, Ashoka
were and $1,195,683 and $695,173, respectively.
Computers - all affiliates, directors of Patni and their relatives.
Employees execute promissory notes for the amount
The Company's executive directors, Mr G.K.Patni and Mr
advanced along with a guarantor’s agreement as collateral. In
A.K.Patni, under contract of employment until October 22,
the case of long term housing loan, the original house deed
2010, ceased to be executive directors effective October 1,
is sought to be deposited with the Company as collateral, in
2007 but will continue as directors on the Board. Termination
addition to the guarantor’s agreement.
benefit payments as provided in the contract of employment
are in compliance with the Indian Companies Act and 24 Line of Credit
amounted to $2,220,139, which have been recorded as The Company has an overall Line of Credit of Rs.610,000,000
selling, general and administrative expenses in the ($12,681,912) and Rs. 610,000,000 ($13,112,639) as of
consolidated statement of income for the year ended December 31, 2008 and 2009, respectively, from its bankers
December 31, 2007. for various requirements such as pre and post shipment loan,

156 Patni > Annual Report 2009

 PATNI COMPUTER SYSTEMS LIMITED AND ITS SUBSIDIARIES

Notes to the Consolidated Financial Statements (Contd.)

Export Bill Discounting, Overdrafts, Working capital demand Assessment Year 2003-04 and Rs. 171 million ($3,675,838)
loan, Financial Guarantees, Guarantees - Bid Bond / for the Assessment year 2005-06 as regards the matter under
Performance, etc. These facilities bear interest as negotiated appeal. Management considers these demands as not tenable
with the bank from time to time. The facilities are secured by against the Company and, therefore, no provision for this tax
accounts receivables of the Company. Patni Inc and Patni contingency has been established.
Telecom have a line of credit of $2,000,000 as of December The tax department had earlier rejected the Company's claim
31, 2008, each for meeting the working capital requirements under section 10A of the Act and raised a demand of
bearing interest at Bank Prime rate less 1% and as of approximately Rs. 630.17 million ($13,546,217 including an
December 31, 2009, there is no line of credit facility available interest demand of approximately $4,016,552) for
for both the entities. There was no outstanding balances Assessment Year 2004-05 and Rs. 261.70 million
under this facility as of December 31, 2008 and 2009. In ($ 5,625,537 including an interest demand of approximately
addition Patni Inc has a facility for issuance of Letters of credit $ 3,006,822) for Assessment Year (‘A.Y.’) 2002-03 in
to the extent of $ 500,000 as of December 31, 2008 and as December 2006 and December 2007, respectively. However
of December 31, 2009. on appeal, in 2008 the CIT (Appeal) had allowed the claim
25 Commitments and Contingencies under section 10A of the Act. The Indian Income tax
25.1 The Company is obligated under a number of contracts department has appealed against the CIT (Appeal’s) orders in
relating to capital expenditure. Estimated amounts remaining respect of assessment year 2002-03 and 2004-05 in the
to be executed on such contracts (net of advances), tribunal. Management considers these demands as not
aggregated $50,108,878 and $55,578,368 at December 31, tenable against the Company and, therefore, no provision for
2008 and 2009, respectively. this tax contingency has been established.
In December 2009 the Income tax department has issued
25.2 Guarantees given by a bank on behalf of Patni amounted
draft assessment order for A.Y.2006-07 disallowing 10A
$1,319,911 and $1,732,404 as at December 31, 2008 and
deduction of the Indian Income Tax Act, 1961 as per the
2009, respectively and letter of credit issued by bank was $Nil
earlier assessments, as well as making a Transfer Pricing
and $365,112 as at December 31, 2008 and 2009,
Adjustment for the Company’s BPO operations. The company
respectively.
has filed the objections against the draft order before the
25.3 In December 2008, the Company received a Demand of Dispute Resolution Panel ("DRP") newly set up under the
approximately Rs 458.66 million for the Assessment Year Income Tax Act, 1961. Management considers these
2003-04 including an interest demand of Rs. 258.64 million disallowances as not tenable against the Company, and
($9,859,521 including an interest demand of approximately therefore no provision is required for this tax contingency has
$5,559,849) and another Demand in January 2009 of been established.
approximately Rs. 1,131.76 million for the Assessment Year Certain other income tax related legal proceedings are
2005-06 including an interest demand of approximately Rs. pending against the Company. Potential liabilities, if any,
421.97 million ($24,328,461 including an interest demand of have been adequately provided for, and the Company does
approximately $9,070,722). These new demands concerns not currently estimate any incremental liability in respect of
the same issue of disallowance of tax benefits under Section these proceedings. Additionally, the Company is also involved
10A of the Indian Income Tax Act, 1961 ('ACT') as per earlier in lawsuits and claims which arise in ordinary course of
assessments. The Company has filed an appeal with the tax business. There are no such matters pending that Patni
authorities and stay of demand has been granted till February expects to be material in relation to its business.
28, 2010 or settlement of appeal whichever is earlier.

As per stay of demand order, through December 2009, the

Company has paid sum of Rs. 66 million ($1,418,744) for the

> 157
 Ratios as per US GAAP
2007 2008 2009
Consolidated Consolidated Consolidated

Ratios - growth
Revenues 14.5% 8.4% (8.8%)
Operating profit 25.7% (35.5%) 31.4%
PAT 92.4% (11.0%) 18.1%
Basic and Diluted EPS 90.7% (8.5%) 24.5%
Ratios - financial performance
Cost of revenues / Revenues 67.9% 68.3% 64.2%
Selling, general and administrative expenses / Revenues 17.5% 18.2% 18.6%
Operating profit / Revenues 17.9% 10.7% 15.3%
PBT / Revenues 20.5% 14.8% 19.0%
Taxation / Revenues 3.3% 0.7% 0.7%
PAT / Revenues 17.2% 14.1% 18.3%
Return on capital employed (ROCE) (PBIT / Average Capital employed) 23.4% 16.3% 18.7%
Return on average networth (RONW) (PAT / Average Networth) 19.2% 16.2% 18.2%
Ratios - Balance Sheet
Debt Equity Ratio 0.0 0.0 0.0
Debtors Turnover (days) 76 58 62
Fixed assets turnover (days) 94 77 82
Current Ratio 4.6 3.1 5.5
Cash and Cash equivalents / Total Assets 38.9% 39.9% 48.7%
Cash and Cash equivalents / Revenues 49.8% 42.5% 67.0%
Per share data
Basic and Diluted EPS ($) 0.82 0.75 0.93
Book value per share ($) 4.90 4.46 5.79
No. of Employees 14,945 14,894 13,995

158 Patni > Annual Report 2009

Risk Management
“To sustain and grow in global market means tussle with the financial services industry,. The ongoing crisis in the financial
uncertainty and more the uncertainty, higher the risk ” and credit markets, particularly, in the United States, has led
to a significant change in the financial services industry, with
The risk management function is integral to the Company
the United States federal government and other national
and its objectives include ensuring that critical risks are
governments being forced to take over or provide financial
identified continuously, monitored and managed effectively in
support to leading financial institutions and with leading
order to protect the Company’s businesses.
investment banks going bankrupt or being forced to sell
Framework themselves in distressed circumstances. Significant changes in
Patni has adopted an integrated risk management framework the financial services industry or any of the other industries
that enables continuous identification, assessment, on which we focus, or a significant consolidation in any such
monitoring and management of the organization’s risks. The industry, may reduce the demand for our services and
audit committee of the board monitors the risk management negatively affect our revenues and profitability. Any
framework to provide direction to the management. The significant decrease in IT services spending by clients in these
framework is designed to identify and assess risks at the industries or other industries from which we derive significant
operational as well as entity level. The mitigation plan is revenues in the future may reduce the demand for our
designed based on management’s response to the assessed services. Further, any significant decrease in the growth of the
risks. The risk framework seeks to address the following key insurance, manufacturing, retail and distribution, financial
risks. services or communications, media and utilities industries, or
significant consolidation in those industries, or any decrease
Business Risks in growth or consolidation in other industry segments in
Being the driver of the Company’s strategy, the top
which we operate, may reduce the demand for our services.
management is well acquainted with the risks inherent to the
software development business and the risks emerging from 2007
its strategic decisions. Therefore, top management plays a
significant role in addressing business risks. These risks can be Insurance
17.0% 23.6%
classified as follows: Manufacturing

Concentration of Service Offerings Financial Services

18.3%
Our clients operate in a limited number of industries. Factors Communication Media and
27.0% Utilities
that adversely affect these industries or IT spending by 14.1%
Product Engineering Services
companies within these industries may adversely affect our
business.
2008
We derive a large proportion of our revenues from clients
which operate in a limited number of industries. In 2007,
2008 and 2009, we derived 23.6%, 24.7% and 29.7% of our Insurance
15.8%
revenues, respectively from the insurance industry, 27.0%, 24.7% Manufacturing
28.9% and 29.0% of our revenues, respectively from the
17.9% Financial Services
manufacturing retail and distribution industry, 18.3%, 17.9%
Communication Media and
and 13.5% of our revenues, respectively from the
28.9% Utilities
12.8%
communications, media and utilities industry, and 14.1%, Product Engineering Services
12.8% and 12.8% of our revenues, respectively from the

> 159
 2009 our revenues, respectively were derived from clients located in
Europe. The economic slowdown in the United States and
Insurance Europe witnessed during the fourth quarter of 2008 and the
15.0%
29.7% Manufacturing entire year 2009, has resulted in our clients reducing or
13.5% Financial Services postponing their technology spending significantly, which in

Communication Media and turn has had a negative impact on the revenues for the year
12.8%
Utilities 2009. If the global economic conditions continue or worsen
29.0%
Product Engineering Services our business could be negatively affected in the future.

2007
Client Concentration 2.7% 1.7%
3.0%
Our client contracts, including those with our two largest
US
customers, typically can be terminated without cause and
14.7% Europe
with little or no notice or penalty, which could negatively
impact our revenues and profitability. Japan

Our clients typically retain us through non-exclusive master Asia pacific excluding Japan
77.9%
services agreements, or MSAs. Most of our client project Rest of the World
contracts, including those that are on a fixed-price and fixed-
price service level agreement, or SLA, basis, can be terminated 2008
3.2% 1.8%
with or without cause, with 0 to 90 days notice and without 3.5%
termination- related penalties. Our MSAs typically do not US
include any commitment by our clients to give us a specific
Europe
volume of business or future work. Additionally, certain of 15.7%
Japan
our MSAs do not require the client to make payments for any
services or work product reasonably deemed unacceptable to Asia pacific excluding Japan
75.9%
the client. Our business is dependent on the decisions and Rest of the World
actions of our clients, many of which are outside our control,
which might result in the termination of a project or the loss 2009
3.2% 1.7%
of a client and we could face liabilities as a result of such 3.5%
termination. Our clients may demand price reductions, US
change their outsourcing strategy by limiting the number of 12.7% Europe
suppliers they use, moving more work in-house or to our
Japan
competitors or replacing their existing software with
Asia pacific excluding Japan
packaged software supported by licensors. Any of these
78.9%
decisions or actions could adversely affect our revenues and Rest of the World
profitability.
Scanning the Competitive Environment
Country Concentration
The Company operates in a highly competitive environment.
Our revenues are highly dependent on clients located in the
It faces competitive pressure from Indian IT services
United States and Europe. Economic slowdowns or factors
companies, multinational IT services companies, in-house IT
that affect the economic health of the United States and
departments, consulting firms, other countries such as China
Europe may adversely affect our business.
and Philippines and intermediaries. The Company has
In 2007, 2008 and 2009, approximately 77.9%, 75.9% and expanded its business in recent years through development,
78.9% of our revenues, respectively were derived from clients enhancement and acquisition of new service offerings and
located in the United States and 14.7%, 15.7% and 12.7% of industry expertise and broadening of geographic presence.

160 Patni > Annual Report 2009

Patni strives to provide customers with superior solutions, by days’ sales outstanding, is about 61 days. The Company
continuously developing technology intensive and innovative primarily has Fortune 1000 customers and hence carries low
solutions. credit risks. In case of non Fortune 1000 customers, the
Company undertakes suitable credit assessments to secure
The Product and Technology Initiatives (PTI) group and the
itself from credit defaults and bad debts on account of such
Delivery Innovation group have been established to provide
customers. The Company has suitably streamlined its
the Company with opportunities to sharpen its solution and
technology edge. The PTI group is focused on applied processes to develop a more focused and aggressive

research and development initiatives. It is also responsible for receivables management system to ensure timely collections.

identifying new opportunities and developing solutions to

Existence and Adequacy of Internal Controls
address these opportunities. The group regularly tracks new
The Company has a well defined internal control system that
technologies and market trends to identify such offerings.
is adequate and commensurate with the size and nature of
Focus groups set up in PTI act as “Seeds for Centers of
its business. Clear roles, responsibilities and authorities,
Excellence” in a particular technology or market, through
coupled with robust internal information systems, ensure
these initiatives. The PTI group has also established systems
appropriate information flow to facilitate effective
that encourage all employees to participate in idea
monitoring. Adequate controls are established to ensure that
generation, evaluation and development of products or
assets of the Company are safeguarded and transactions are
solutions.
executed in accordance with documented policies. Compliance
The Delivery Innovation group is focused on operational with the above policies is monitored through regular internal
excellence and serving customers in the most efficient audits of processes as well as underlying transactions. The
manner. This group’s activities include developing and Company has a Corporate Risk Management team that
refining methodologies, tools and techniques, implementing focuses on internal controls and internal audits, besides
metrics, improving estimation processes and adopting new engaging independent audit firms as internal auditors. The
technologies. Audit Committee approves Annual Internal Audit Plan and
Business Models and Structure periodically reviews their reports and recommendations.
Patni offers a wide spectrum of services in several industry Action plans are agreed with the process owners to facilitate
and technology practices. The Company is continuously proper implementation of the recommendations. The auditors
working towards enhancing the number of industry segments also conduct follow up reviews to report on the efficacy of
and service lines to manage revenue concentration and the implementation process.
excessive dependence on any one industry practice,
technology practice or service lines. All fixed price contracts Risks emerging from nature of Financial
are monitored closely to ensure that all contractual Operations
obligations and project deadlines are met and to mitigate the Foreign Exchange Fluctuations
delivery risk. Patni has a dedicated enterprise risk The Company earns revenues in various currencies, with
management team that focuses on project delivery risks. It revenues in US dollars comprising the bulk, whereas a
identifies the critical projects and monitors the delivery risks significant part of costs is in Indian Rupee. This exposes the
faced in relation to such projects. The Company faces Company to risks arising out of fluctuations in the foreign
potential risks arising out of political instability, changes in exchange rates, especially in case of USD-INR. The Company
the currently favorable policies of the government towards seeks to reduce effect of such risks by using hedging
the software sector, etc. The Indian government has instruments such as currency forwards and options. The
recognized the global competitiveness of the Indian software treasury team focuses on mitigating foreign exchange
industry and continues to adopt progressive policies to fluctuation risks in accordance with the Forex policy framed
encourage sustainable growth of the industry. by the Audit Committee in this regard.

Accounts Receivable Liquidity Management

The Company’s receivables position, measured in terms of The Company’s cash reserves and liquid assets are managed

> 161
 through efficient treasury operations. Patni is a nearly zero- from nonperformance of contractual obligations.
debt Company except for a small exposure towards car lease.
Taxation
Its investment policy is driven by the objectives of i) ensuring
The Company has trans-national operations. The Company
adequate liquidity to meet its business requirements and ii)
operates in various geographies and is exposed to
safety of its investments. Accordingly, the investible surpluses
international tax laws including various elements of payroll
are deployed in debt oriented investment avenues such as
taxes in such geographies. The Company is suitably
cash, liquid or short term debt funds, short tenure certificate
represented by competent legal firms in such geographies
of deposits etc. The company also invests in fixed maturity
where it has its operations. These firms advise the Company
plans of various tenors. These investments are governed by
on various legal requirements. The Company takes a proactive
various prudential norms in order to mitigate risk and are
approach and engages experts and consultants before the
made in accordance with the Investment policy framed by the
operations are set-up, so as to be compliant from initial
Audit Committee in this regard.
stages itself.
Legal and Regulatory Risks Fixed asset and employee insurance
Conformity with Local Laws and Regulation The fixed assets and facilities of the Company are
The Company has transnational operations, with a global comprehensively covered under suitable insurance policies.
workforce. This requires it to ensure that its diverse workforce The Company has taken mediclaim cover for employees and
is sensitive to and compliant with local laws. The Company their dependants. The Company also covers them for personal
has processes to make the workforce aware of local accident, permanent disability and critical illness. In addition,
employment laws and significant legal requirements the Company covers the risks associated with medical illnesses
pertaining to work practices. The Company has issued ADRs for employees traveling abroad on deputation onsite.
in the US and is listed on the New York Stock Exchange in
December 2005. The company is exposed to regulatory Intellectual property
requirements in the US. The Company is suitably represented The Company has developed a comprehensive approach to

by competent legal firms at different locations where it has its protect itself against infringement of Intellectual Property (IP).
operations. These firms advise the Company on various The IP may belong to its customers, third parties or even to
requirements. the Company. Processes are in place to protect the
Company’s IP from misuse by third parties. At the same time,
Directors and Officers Liability
the Company has controls in place to ensure that it is not
Directors’ and Officers’ (D&O) liabilities are risks arising out of
exposed to risks associated with the misuse of IP or
their commitments, statements and decisions which may
technology products owned by third parties. In addition, the
result in legal liability to any third party. The Company has
Company ensures that only licensed software is used in all its
appropriately and sufficiently insured itself to mitigate such
facilities. Further, the legal cell ensures that IP related issues
risks. In addition, there are internal policies, procedures and
are given due consideration while executing agreements with
communications that guide the officers to act with proper
customers or third parties.
diligence.

Contracts Conducive Environment for Employee

Contractual risks may arise out of non-performance of Retention and Development
contracts or any other breach in the contracts signed by the The Company operates in a sector, where human resources
Company with its customers or other external entities. The are the most critical resources in business. Its human
Company has a centralized contract management cell that resources division, the resource management team and the
reviews contracts with the Company’s customers, key business units work closely with each other to ensure timely
suppliers, business partners and associates. Suitable insurance and effective recruitment to support the growing business
covers including Errors & Omission and Commercial & needs of the Company. The skills and experience of
General Liability have also been obtained. These insurance employees are aligned with the job requirements on a
covers protect the Company from financial risks emanating continuous basis to ensure the most productive and efficient

162 Patni > Annual Report 2009

allocation of resources. The Company also conducts training cluster servers with built-in high availability and redundancy.
programmes to continuously enhance technical and Company has also deployed Virtualization technology to get
behavioural skills of its employees. The Company encourages advantage of better utilization of IT assets and efficient
functional movements to promote employee development recovery of servers and applications. The Company’s IT
and growth thereby helping the Company in its pursuit of infrastructure is being monitored with the help of state-of-art
employee retention and improved productivity. monitoring applications with automatic notification and

The Company operates in a sector where attrition rates are escalation mechanism. There is also a 24x7 on-site team

high. It therefore may face the challenge of attracting and operating out of Global Visibility Center (GVC), which

retaining professional and skilled talent to be able to provides online support to the Company IT infrastructure. The

continuously deliver a superior quality of service. Patni Company has a very efficient multi tier virus tracking and
endeavours to attract and retain the best professional talent, scanning system to ensure a virus free environment. The
by creating a professional work culture, by offering exciting Company has deployed multi tier security mechanism to
growth opportunities and by exposing employees to new protect Company’s IT infrastructure from malicious users.
technologies through on-going training programmes. The Multi-tier clustered firewalls and intrusion prevention and/or
Company also offers ESOPs to certain employees. detection systems are in place at all internet gateways to
ensure adequate safety to all the Company’s systems and to
Leadership Development and Continuity prevent hacking.
The Company has a leadership development framework called
The Company has a strong Disaster Recovery and Business
Leadership Excellence At Patni (LEAP) through which it
Continuity Practice (DR/BC) for all its operations. Periodic
identifies employees with leadership potential.
reviews are carried out to ensure that all the DR/BC

Technology Obsolescence, Business compliance requirements are met. Mock drills and audits are

Continuity and Disaster Recovery Planning conducted to ensure the adequacy of the DR/BC plans. The
The Company could face challenges with its existing logical security of information systems is adequate and it is
infrastructure such as unavailability of internet, voice and reviewed regularly since new threats occur every day. The
international links, power failures, network systems failures, security audit and architecture organization was strengthened
etc. which could adversely impact the delivery of services. To with adoption of the ISO27001 standard for information
overcome these challenges, each development centre is security to further enhance the security processes. Once in a
connected to the national backbone built with high speed year company carries out independent third party assessment
multiple data links from multiple vendors. The national of Security called as Vulnerability Assessment and Penetration
backbone is designed with state-of-the-art technologies and Testing or Ethical Hacking. Recommendations and
protocols. The Company has several links to US & UK Data Remediation are implemented on the basis of the impact of
Centers, using different routes provided by multiple service the vulnerability. Data backups are taken daily and stored in
providers. Redundancy in air-conditioning equipment, UPS, fireproof safes at secured alternate locations. The Company
generators, power supply, LAN & WAN equipment, links and has ensured un-interrupted power supply to all its
24x7 tracking & monitoring of IT infrastructure ensures that development and data centers by deploying adequate
standby mechanisms take over immediately whenever any redundant power sources to take care of power outages. The
critical system breaks down. For mission critical systems and Company has deployed technologies like Storage Area
applications, the Company is using high end blade and Network (SAN) to ensure high availability of its own data.

> 163
 Patni World-wide
AMERICAS Fax: +1 408 935 9690 C/o Tel: +44 20 8283 2300
E-mail: patni-usa@patni.com C/o Fax: +44 20 8759 9501
CANADA
C/o E-mail: patni-uk@patni.com
Patni Americas, Inc. Patni Americas, Inc.
Suite 1801, 1 Yonge St Harborside Plaza 5 FINLAND
Toronto Star Building Suite 2910, 29th Floor Patni Computer Systems Ltd. (Finland
Toronto, Ontario M5E 1W7. Jersey City, NJ 07311. Branch)
Tel: +1 416 214 7840 Tel: +1 201 680 7600 Annankatu 34A
Fax: +1 416 369 0515 Fax: +1 201 333 2180 00100 Helsinki, Finland.
E-mail: patni-usa@patni.com E-mail: patni-usa@patni.com Tel: +358 9 4730 7240
Fax: +358 9 586 5030
MEXICO Patni Life Sciences, Inc.
E-mail: patni-finland@patni.com
PCS Computer Systems Mexico, SA de CV 1170 US Highway 22 East
Av. Prolongacion Tecnologico s/n Bridgewater, NJ 08807. GERMANY
Edificio Parque Tecnologico, 6to. Piso Tel: +1 908 255 1600 Patni Computer Systems GmbH
Fracc. San Pablo, C.P. 76130 Fax: +1 908 725 8999 Excellent Business Center
Querétaro, Qro., Mexico. E-mail: patni-usa@patni.com Bockenheimer Landstraße 17/19
Tel: +52 442 290 6400 60325 Frankfurt am Main
Patni Americas, Inc.
Fax: +52 442 290 6436 Germany.
1400 Opus Place
E-mail: patni-mexico@patni.com Tel: +49 69 710 455 231
Suite 525
Fax: +49 69 710 455 450
U.S.A Downers Grove, IL 60515.
E-mail: patni-germany@patni.com
Patni Americas, Inc. Tel: +1 630 874 1801
One Broadway, 15th Floor Fax: +1 630 271 9296 IRELAND
Cambridge, MA 02142. E-mail: patni-usa@patni.com Patni Computer Services Ltd (Ireland
Tel: +1 617 914 8000 Branch)
Patni Americas, Inc.
Fax: +1 617 914 8200 Fitzwilliam Hall
205 N. Main Street
E-mail: patni-usa@patni.com Fitzwilliam Place
Bloomington, IL.
Dublin 2, Ireland.
Patni Americas, Inc. Tel: +1 309 823 4000
C/o Tel: +44 20 8283 2300
11260 Chester Road, Suite # 600 Fax: +1 309 829 3400
C/o Fax: +44 20 8759 9501
Spectrum Office Tower E-mail: patni-usa@patni.com
C/o E-mail: patni-uk@patni.com
Cincinnati, OH 45246. Patni Americas, Inc.
Tel: +1 513 772 2072 ROMANIA
16 Zane Grey
Fax: +1 513 772 5082 Patni Computer Systems Ltd (Romania
Suite 250/300
E-mail: patni-usa@patni.com Branch)
El Paso, TX 79906.
Municipiul Bucuresti, Sector 5, COD
Patni Americas, Inc. Tel: +1 915 774 7001
Postal: 050113, Intr. Vasile Paun Nr.1
Palisades Office Park Fax: +1 915 774 7099
Et3, Ap.3, Romania.
5901-B Peachtree Dunwoody Road NE E-mail: patni-usa@patni.com
C/o Tel: +44 20 8283 2300
Suite 390
C/o Fax: +44 20 8759 9501
Atlanta, GA 30328. EUROPE, MIDDLE EAST, AFRICA
C/o E-mail: patni-uk@patni.com
Tel: +1 770 395 0300 (EMEA)
Fax: +1 770 395 9911 SOUTH AFRICA
CZECH REPUBLIC
E-mail: patni-usa@patni.com Patni Telecom Solutions Pvt Ltd.
Patni Computer Systems (Czech) s.r.o.
(South Africa Branch)
Patni Telecom Solutions, Inc. USA Prague 8, Karlin
C/o WK Wilton Inc.
1521 California Circle Sokolovska 84/366
9 Kinross Street
Milpitas, CA 95035. Postal Code 186 00
PO Box 4119
Tel: +1 408 934 4800 Czech Republic.

164 Patni > Annual Report 2009

Germiston South UAE. Tel: +91 22 3917 5000
Johannesburg 1401. PO Box – 124097. Fax: +91 22 3917 5002
Tel: +27 832128681 Tel: 971 4 3307647 E-mail: patni-airoli@patni.com
E-mail: patni-sa@patni.com Fax: 971 4 3306570
Patni Computer Systems Ltd.
E-mail: patni-dubai@patni.com
SWEDEN Unit 5-8, Electronic Sadan III, MIDC Bhosari
Patni Computer Systems Ltd. (Sweden UNITED KINGDOM Pune 411 026
Branch) Patni Computer Systems (UK) Ltd. India.
Kista Entre, Knarrarnasgatan 7-9 The Patni Building Tel: +91 20 2710 5000
164 40 Kista, Sweden. 264-270, Bath Road Fax: +91 20 2712 1882
C/o Tel: +358 9 4730 7240 Heathrow UB3 5JJ E-mail: patni-pune@patni.com
C/o Fax: +358 9 586 5030 United Kingdom.
Patni Computer Systems Ltd.
E-mail: patni-sweden@patni.com Tel: +44 20 8283 2300
Level 0,1,2,5 & 6 Tower III
Fax: +44 20 8759 9501
SWITZERLAND Cyber City, Magarpatta City Hadapsar
E-mail: patni-uk@patni.com
Patni Computer Systems Limited Pune 411 013
(Switzerland Branch) India.
SAARC
Seestrasse 131 Tel: +91 20 3984 2000
8027 Zurich INDIA Fax: +91 20 3984 2082
Switzerland. Patni Computer Systems Ltd. E-mail: patni-pune@patni.com
C/o Tel: +49 69 710 455 231 Akruti, MIDC Cross Road No 21
Patni Computer Systems Ltd.
C/o Fax: +49 69 710 455 450 Andheri (E), Mumbai 400 093
Patni Knowledge Center
C/o E-mail: patni-germany@patni.com India.
139, 140, A Block
Tel: +91 22 6693 0500
THE NETHERLANDS Noida Special Economic Zone (NSEZ)
Fax: +91 22 6693 0211
Patni Computer Systems Ltd. (Netherlands Noida, 201305
E-mail: patni-mumbai@patni.com
Branch) India.
Joop Geesinkweg 901-999 Patni Computer Systems Ltd. Tel: +91 120 332 6000
1096 AZ Amsterdam 55, SDF II, SEEPZ Fax: +91 120 332 6200
The Netherlands. Andheri (E), Mumbai 400 096 E-mail: patni-noida@patni.com
Tel: +31 20 5616063 India.
Patni Computer Systems Ltd.
Fax: +31 20 5616666 Tel: +91 22 2829 1454
Patni Knowledge Center
E-mail: patni-nl@patni.com Fax: +91 22 2829 2764
142 E&F, B Block
E-mail: patni-mumbai@patni.com
TURKEY Noida Special Economic Zone (NSEZ)
Patnı Computer Systems Limited (Turkey Patni Computer Systems Ltd. Noida, 201305
Branch) Building Nos - 104, 305 & 306, Sector No. II India.
Ğnöünü Mahallesi Millennium Business Park, Mahape Tel: +91 120 332 4000
Üftade Sk. No:11/B Elmada₣ Navi Mumbai 400 710 Fax: +91 120 332 4799
Istanbul, Turkey. India. E-mail: patni-noida@patni.com
C/o Tel: +44 20 8283 2300 Tel: +91 22 2778 3600
Patni Computer Systems Ltd.
C/o Fax: +44 20 8759 9501 Fax: +91 22 2778 1086
A-78/9, GIDC Electronics Estate
C/o E-mail: patni-uk@patni.com E-mail: patni-mumbai@patni.com
Sector 25, Gandhinagar 382 016
UAE Patni Computer Systems Ltd. India.
Patni Telecom Solutions Pvt Ltd. (Dubai Patni Knowledge Park Tel: +91 79 2328 7000
Branch) IT 1 / IT 2, TTC Industrial Area Fax: +91 79 2328 7007
Office No- 232, 2nd Floor Thane-Belapur Road, Airoli E-mail: patni-gnr@patni.com
KML Business Centre Navi Mumbai 400 708
Al Qouz, Dubai India.

> 165
 Patni Computer Systems Ltd. Patni Computer Systems Ltd. JAPAN
Sipcot IT Park 5Q4-A1 & A2, Cyber Towers Patni Computer Systems Ltd. (Japan
Old Mahabalipuram Road Hitec City, Madhapur Branch)
Siruseri, Chennai 603 103, India. Hyderabad 500 081 Kudan Center Building 1F
Tel: +91 44 4744 4444 India. 4-1-7, Kudan-Kita, Chiyoda-ku
Fax: +91 44 4744 4445 Tel: +91 40 4488 6000 Tokyo 102-0073, Japan.
E-mail: patni-chennai@patni.com Fax: +91 40 4488 6002 Tel: +81 3 3222 8031
E-mail: patni-hyd@patni.com Fax: +81 3 3222 8030
Patni Computer Systems Ltd.
E-mail: patni-japan@patni.com
Unit II B - 43, Velankani Complex
ASIA-PACIFIC (APAC)
Electronics City Phase 1 SINGAPORE
Hosur Road AUSTRALIA Patni (Singapore) Pte Ltd
Bengaluru 560 100 Patni Computer Systems Ltd. (Australia 61 Robinson Road
India. Branch) #16-02 Robinson Centre
Tel: +91 80 4190 2100 Suite 202, 54 Miller Street Singapore 068893.
+91 80 3910 2100 North Sydney, NSW 2060 Tel: +65 6602 6600
Fax:+91 80 2852 7150 Australia. Fax: +65 6602 6610
E-mail: patni-bangalore@patni.com Tel: +61 2 8920 1122 E-mail: patni-singapore@patni.com
Fax: +61 2 8920 1622
Patni Telecom Solutions Pvt. Ltd. Patni (Singapore) Pte Ltd
E-mail: patni-australia@patni.com
Maximus Towers ‘2B’, III & IV Floors 438B Alexandra Road
Raheja Mindspace IT Park Patni Computer Systems Ltd. (Australia Unit #01-02 Alexandra Techno Park
Software Units Layout, Branch) Singapore 119968.
Madhapur, Hyderabad 500 081 Suite 205, 530 Little Collins Street Tel: +65 6602 6600
India. Melbourne, VIC 3000 Fax: +65 6602 6610
Tel: +91 40 3071 5000 Australia. E-mail: patni-singapore@patni.com
Fax: +91 40 3071 5001 Tel: +61 03 9909 7981
E-mail: patni-hyd@patni.com Fax: +61 03 9909 7788
E-mail:patni-australia@patni.co

166 Patni > Annual Report 2009

Corporate Information
Board of Directors Registrars and Transfer Agents
Mr. Narendra K Patni, Chairman Karvy Computershare Private Limited
Mr. Jeya Kumar, Chief Executive Officer Plot No. 17-24
Mr. Gajendra K Patni, Non-Executive Director Vittal Rao Nagar, Madhapur
Mr. Ashok K Patni, Non-Executive Director Hyderabad 500 081
Mr. William O Grabe, Non-Executive Director India.
Mr. Louis Theodoor van den Boog , Non-Executive Director Tel: +91 40 2342 0815–820
Mr. Arun Duggal, Independent Director Fax: +91 40 2342 0814
Mr. Pradip Shah, Independent Director e-mail: igkcpl@karvy.com
Mr. Ramesh Venkateswaran, Independent Director
Dr. Michael A Cusumano, Independent Director Auditors to the Company
Mr. Pradip Baijal, Independent Director B S R & Co.

Mr. Vimal Bhandari, Independent Director KPMG House

Mr. Abhay Havaldar, Alternate Director to Mr. William O Grabe 448, Kamala Mills Compound
Senapati Bapat Marg
Company Secretary Lower Parel, Mumbai 400 013
Mr. Arun Kanakal India.
Tel: +91 22 3044 0800
Bankers Fax: +91 22 3044 0900
Standard Chartered Bank
90 M G Road, Fort Registered Office
Mumbai 400 001 S-1A, F-1, Irani Market Compound
India. Yerawada, Pune 411 006
India.
Investor Relations Office Tel: +91 20 26613457
Akruti Softech Park Fax: +91 20 26613457
MIDC Cross Road No. 21
Andheri (E) Mumbai 400 093 Corporate Office
India. Akruti Softech Park
Tel: +91 22 6693 0500 MIDC Cross Road No. 21
Fax: +91 22 2832 1750 Andheri (E), Mumbai 400 093
e-mail: investors.redressal@patni.com India.
Tel: +91 22 6693 0500
Fax: +91 22 2832 1750

> 167
 Notes

168 Patni > Annual Report 2009

www.patni.com