Patni Computer Systems

The Directors have pleasure in presenting their Thirtieth
 Annual Report together with Audited statements of Accounts for
 the year ended 31 December 2007:
 
 Financial Results
 
                                          31 Dec 2007       31 Dec 2006
                                     (Rs. in million)  (Rs. in million)
 
 Sales                                         11,723            9,978
 
 Resulting in Profit Before Tax                 4,357            3,059
 
 Profit After Tax ,                             3,875            2,058
 
 Profit available for appropriation 
 after adding to it Previous
 Years Brought Forward                        13,302           10,106
 
 Appropriated as under:
 
 Adjustment on account of employment benefits       7                -
 
 Transfer to General Reserve                      388              205
 
 Final Proposed Dividend on Equity
 Shares @ 150% (Previous Year
 150 %)                                           418              415
 
 Corporate Tax on above Dividend                   83               58
 
 Balance Carried to Balance Sheet              12,406            9,428
 
 Business Performance
 
 The performance of your Company during the year under report has
 shown improvement over the previous year.  Total revenue for the
 year ended 31 December 2007 amounted to Rs. 11,723 million as
 against Rs. 9,978 million for the corresponding period last year
 registering growth of about 17.5%. The Company has posted the
 Net Profits after tax to Rs. 3,875 million as compared to Rs.
 2,058 million for the corresponding period last year registering
 growth of about 88% for the year ended 31 December 2007. Even on
 consolidated basis, revenues were increased in the current year
 2007 by 14.5 % to US$ 662.9 million from US$ 578.9 million in
 2006 and net income increased by 44%.
 
 Dividend
 
 Your Directors are pleased to recommend the payment of dividend
 for the year ended 31 December 2007 at Rs.3/- (Rupees Three
 only) per share (150 percent) on face value of Rs.2/- [Previous
 year Rs.3/- per share (150 percent)] , subject to approval of
 Members at the ensuing Annual General Meeting.
 
 Business Overview
 
 Your Company is one of the leading providers of information
 technology services. The Company delivers a comprehensive range
 of IT services through globally integrated onsite and offshore
 delivery locations primarily in India. Your Company addresses
 its clients needs with its global delivery model, through which
 it allocates resources in a cost-efficient manner using a
 combination of onsite client locations in USA, Europe, Japan,
 Asia Pacific and Rest of the world and offshore locations in
 India. Your Company believes that an integral to its delivery
 competence is its domain expertise. Overall, your Company
 derives significant strength from its focused industry
 expertise, successful client relationships, extensive suite of
 IT services, delivery and operational excellence, highly
 experienced management team and dedicated and highly skilled
 delivery professionals.
 
 Business Segments
 
 Your Company offers its services to customers through industry
 practices in insurance, manufacturing, financial services and
 telecommunications, as well as in other industries. Your Company
 also has technology practices that offer services in product
 engineering and for Independent Software Vendors (ISVs). Both
 industry practices and technology practices are complemented by
 service lines, which are developed in response to client
 requirements and technology life cycles. Your Companys range of
 services includes application development, application
 maintenance and support, packaged software implementation,
 infrastructure management services, product engineering,
 business process outsourcing and quality assurance services.
 
 Customer Relationships
 
 Your Company has always demonstrated the ability to build and
 manage relationships with some of the worlds largest and best
 known companies. Our strategy to diversify our revenue profile
 is on course. In keeping with our thrust to diversify our
 revenue profile, our top client contribution towards revenue
 reduced from 14.6% in 2006 to 11.8% during 2007. Similarly,
 revenues from top 10 clients reduced from 53.1% in 2006 to 47.3%
 in 2007. While nurturing long-term relationships with existing
 customers, your Company has continued to expand its customer
 base. The Company added 37 new clients during 2007 and its
 active client base has increased significantly to 318 clients as
 of 31 December 2007. The number of $ 1 million client
 relationships increased by 10 during the year taking the tally
 to 84.
 
 Your Companys percentage of repeat business continued to be
 stable at 91.5%. Similarly, your Companys strategy to improve
 the geographical diversification of Companys client base is on
 track with revenues from Europe, Japan and Asia-Pacific
 (excluding Japan) registering strong growth. On the regional
 performance front, in 2007, Europe continued to show good
 growth.
 
 In line with our strategy to diversify our geographical profile,
 Europes contribution to our revenues increased to 14.7% in 2007
 from 11.6% in 2006.
 
 On the industry-vertical front, Product Engineering Services and
 Manufacturing recorded significant growth contributing 16.8% and
 23.7%, respectively, to total revenues in 2007.
 
 Our focus to expand our service offerings continues, with
 contribution of Application Development & Maintenance reducing
 considerably to 64.9% in 2007 from 70.8% in 2006.
 Simultaneously, the contribution of Enterprise Application
 Solutions, Infrastructure Management Services and BPO together
 increased to 23.6% in 2007 from 19.8% in the previous year.
 
 Sales and Marketing Initiatives
 
 Your Company has further consolidated global verticalization
 initiative. The Company has realigned its business unit
 structures to create sharper focus on select industry and
 technology practices. The North American sales organization has
 been realigned and integrated with the said industry and
 technology practices. A majority of your Companys sales and
 marketing teams focus on specific industries & have Accounts
 Managers to manage relationship with large customers. In
 addition to sales executives, there are industry experts and
 solution architects who complement the sales efforts by
 providing specific industry and service line expertise.
 
 Personnel & Performance
 
 Your Company has established a work ethic based on values that
 transcend across its global operations. The culture is oriented
 to high growth and performance that allows the Company to
 attract, motivate and retain high quality talent worldwide.
 Abilities are recognized with rewards for high performance.
 
 Your Company uses its competitive recruitment program to select
 talent from Indias premier engineering institutions. An
 adaptive business model and mature management structure allow
 aggressive scalability without compromising on flexibility,
 responsiveness and reliability of services.
 
 On 31 December 2007, the employee strength of your Company stood
 at 14,945 with approximately 2,141 additions over year 2006.
 
 Facility Expansion
 
 During the year,Your Company added net 3,12,000 sq.  ft. of
 space of Mumbai East and Hyderabad. With a view to build our own
 campuses, your Company has- acquired land in four locations -
 Noida, Pune, Hyderabad and Kolkata, in addition to the land your
 Company has in Mumbai and Chennai.
 
 All of your Companys development centers were assessed at
 SEI-CMMI Level 5 by KPMG, India.
 
 Challenges ahead - 2008
 
 As the Company enters 2008, we must be ready to face the
 challenging times ahead. External factors like the appreciating
 rupee, concern around overall IT spending in the US and
 competition with major global players continue to loom large.
 The Companys internal challenges come from the various changes
 in our client and geography mix and poor revenue visibility.
 
 With the growing commoditization of global services, the Company
 needs to strongly differentiate itself. The Company needs to
 find ways to extend its value chain and bolster bottom-line. The
 Company needs to work harder towards delivering tangible results
 to its global customers. The Company can achieve this by
 focusing on building and enhancing our consulting capabilities,
 and frameworks, solutions and platform-enabled services across
 its verticals and horizontals. As the market dynamics are
 changing, the Company needs to keep up with the times in terms
 of customer demand, market shifts and changing nature of
 competition.
 
 Corporate Developments & Accolades
 
 Your Company signed a Memorandum of Understanding (Moll) with
 BITS Pilani through the BITS Off-Campus Distance Learning &
 Collaborative Programmes scheme to hone the skills of employees
 for our growing Product Engineering Services (PES) division.
 
 Your Company acquired Microsoft Gold Partner Certification
 status with Business Intelligence as one of our key
 competencies. This puts us in the elite list of global partners
 who have this standing with Microsoft.
 
 Trillium Software, a leading enabler of Total Data Quality
 solutions, aligned with the Company to help provide
 organizations with an assessment of their data quality needs.
 With this partnership, your Company will provide organizations
 with data quality assessment using Trillium Softwares Discovery
 and Insight solutions.
 
 Your Company was bestowed with the prestigious Golden Peacock
 National Training Award (GPNTA) for 2007. This award is
 recognition of excellence in training practices and relates
 effective training with improved business and individual
 performance by providing role models in all sectors of Indian
 Corporate life.
 
 Patni ESOP 2003 (Revised 2006)
 
 Your Company had introduced the Employees Stock Option Plan
 known as Patni ESOP 2003. Under the Plan, the Company is
 authorised to issue 11,142,085 equity shares of Rs. 2/- each
 upon the exercise of options granted to employees and / or
 directors of the Company and its subsidiaries. As these Options
 were issued on market related prices, the recent fall in the
 market prices in general and the information technology
 companies shares in particular, the Options granted to the
 employees have become unattractive. In order to make them
 attractive and to motivate the employees to perform better, it
 is now proposed to modify Options terms by reducing the number
 of Options at the revised exercise price of Rs. 2/- per share at
 the option of the employees, as detailed in the notice convening
 the Annual General Meeting. This proposal requires the approval
 of the Members by way of special resolution.
 
 The Plan is being administered by the Compensation and
 Remuneration Committee of Directors constituted as per SEBI
 Guidelines. The details of Options granted under the Plan are
 given in the Annexure to this Report.
 
 Subsidiary Companies
 
 The Company has wholly owned subsidiaries viz. Patni Americas,
 Inc. (formerly Patni Computer Systems, Inc), Patni Computer
 Systems (UK) Limited and Patni Computer Systems GjnbH.
 
 Patni Telecom Solutions, Inc. is a subsidiary of Patni Americas,
 Inc., Companys one of the main subsidiaries.
 
 Patni Telecom Solutions (P) Limited and Patni Telecom Solutions
 (UK) Limited are subsidiaries of Patni Telecom Solutions, Inc.
 
 During the year, Patni Americas, Inc., Companys one of the main
 subsidiaries, had acquired Taratec Development Corp.
 (Taratec). Name of Taratec was later changed to Patni Life
 Sciences, Inc.
 
 Your Company also set up a wholly owned Subsidiary in Brazil
 viz. Patni Computer Systems Brasil Ltda.
 
 In view of the above and by virtue of Section 4 of the Companies
 Act, 1956, the Company has following eight subsidiaries
 (Collectively to be referred as Subsidiary Companies): i)
 Patni Americas, Inc.; ii) Patni Computer Systems (UK) Limited;
 iii) Patni Computer Systems GmbH; iv) Patni Telecom Solutions,
 Inc.; v) Patni Telecom Solutions (UK) Limited; vi) Patni Telecom
 Solutions (P) Limited; Vii) Patni Life Sciences, Inc. and viii)
 Patni Computer Systems Brasil Ltda.
 
 The Company has been granted exemption for the year ended 31
 December 2007 by the Ministry of Corporate
 
 Affairs vide its letter dated 29 February 2008 from attaching to
 its Balance Sheet, the individual Annual Reports of each of its
 Subsidiary Companies. As per the terms of the said letter, a
 statement containing brief financial details of the Companys
 subsidiaries for the year ended 31 December 2007 is included in
 the Annual Report. The annual accounts Subsidiary Companies and
 the related detailed information will be made available to any
 Member of the Company / its Subsidiary Companies seeking such
 information at any point of time and are also available for
 inspection by any Member of the Company / its Subsidiary
 Companies at the Registered Office of the Company. The annual
 accounts of the Subsidiary Companies will also be available for
 inspection, as above, at the registered offices of the
 respective Subsidiary Companies.
 
 Directors
 
 In accordance with the requirements of the Companies Act, 1956
 and Articles of Association of the Company, Mr. Arun Duggal and
 Mr. William Grabe are liable to retire and eligible for
 reappointment in the forthcoming Annual General Meeting.
 
 During the year, Mr. Gajendra K Patni & Mr. Ashok K Patni ceased
 to be Executive Directors w.e.f. 2 October 2007.  However, they
 continue to act as Directors on the Board of Directors of the
 Company.
 
 The Board of Directors, at their meeting held on 29 April 2008
 had appointed Mr. Louis Theodoor van den Boog as an Executive
 Director of the Company upto 31 March 2013. It is proposed to
 obtain the necessary approval from the Members of the Company in
 the ensuing Annual General Meeting. The Board recommends the
 resolution for your approval.
 
 Corporate Governance
 
 Your Company follows the principles of the effective corporate
 governance practices. The Clause 49 of the Listing Agreement
 deals with the Corporate Governance requirements which every
 publicly listed Company is required to comply with. The Company
 has taken steps to comply with the requirements of revised
 Clause 49 of the Listing Agreement with the Stock Exchanges.
 
 A separate section on Corporate Governance forming part of the
 Directors Report and certificate from the Companys Auditors
 confirming the compliance of conditions on Corporate Governance
 as stipulated in Clause 49 of the Listing Agreement is included
 in the Annual Report.
 
 Particulars of Employees
 
 Particulars of employees as required under the provisions of
 Section 217 (2A) of the Companies Act, 1956 read with the
 Companies (Particulars of Employees) Rules, 1975, as amended,
 forms part of this Report. However, in pursuance of.-Section
 219(l)(b)(iv) of the Companies Act, 1956, this Report is being
 sent to all the Members of the Company excluding the aforesaid
 information and the said particulars are made available at the
 registered office of the Company. The Members desirous of
 obtaining such particulars may write to the Company Secretary at
 the registered office of the Company.
 
 Fixed Deposits
 
 Your Company has not accepted any fixed deposits from the
 Public. As such, no amount of principal or interest is
 outstanding as of the balance sheet date.
 
 Auditors
 
 M/s BSR & Co., Chartered Accountants, the present statutory
 auditors of the Company holds office until the conclusion of the
 ensuing Annual General Meeting. It is proposed to reappftint
 them as the statutory auditors of the Company until the
 conclusion of the next Annuai General Meeting. M/s BSR & Co.,
 have, under section 224(1) of the Companies Act, 1956, furnished
 the certificate of their eligibility for reappointment.
 
 Directors Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the
 Directors, based on the representation received from the
 Operating Management, confirm that:
 
 (a) in the preparation of the annual accounts, the accounting
 standards have been followed and that there are no material
 departure;
 
 (b) they, in selection of accounting policies, have consuited
 the Statutory Auditors and have applied them consistently and
 made judgments and estimates that are reasonable and prudent so
 as to give a true and fair view of the state of affairs of the
 Company as at 31 December 2007 and the Profit of the Company for
 the period 1 January 2007 to 31 December 2007;
 
 (c) they have taken proper and sufficient care, to their best of
 knowledge and ability, for the maintenance of adequate
 accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company
 and for preventing and detecting fraud and other irregularities;
 
 (d) they have prepared the annual accounts on a going concern
 basis.
 
 Conservation* of Energy, Technology Absorption and Foreign
 Exchange Earnings / Outgo
 
 A) Conservation of Energy
 
 Your Company consumes electricity only for the operation of its
 computers. Though the consumption of electricity is negligible
 as compared to the total turnover of the Company, your Company
 has taken effective steps at every stage to 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.
 
 C) Foreign Exchange Earnings/Outgo
 
 Earnings in Foreign                                        31 Dec 2007
 Currency on account of:                               (Rs. in million)
 
 Export Sale                                                     11,620
 
 Others                                                               5
 
 Total Earnings                                                  11,625
 
 Expenditure in Foreign                                     31 Dec 2007
 
 Currency on account of:                               (Rs. in million)
 
 Traveling Expenses                                                289
 
 Overseas Employment Expenses                                      770
 Professional Fees &
 
 Consultancy Charges                                               130
 
 Subscription & Registration Fees                                    2
 
 Other Matters                                                      88
 
 Total Expenditure                                               1,279
 
 Net Earnings in Foreign Currency                               10,346
 
 Acknowledgements
 
 Your Directors wish to convey their appreciation to all the
 Companys employees for their performance and continued support.
 The Directors would also like to thank all the shareholders,
 consultants, customers, vendors, bankers, service providers and
 governmental & statutory authorities for their continued
 support.
 
                            For and on behalf of the Board of Directors
 
                                   Narendra K Patni    Gajendra K Patni
                                    Chairman & CEO       Director
 
 29 April 2008