Mid-sized Indian software services firm Patni Computer Systems is looking to buy a company

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in Europe or Asia Pacific for $50 million to $200 million, a top official said on Wednesday. Patni, which follows a Jan-December fiscal year, caters to industries such as insurance, telecom, energies and utilities and retail, had cash and cash equivalents of $317.8 million at the close of the September quarter.

"We are looking at 2-3 companies very closely," Chief Financial Officer Surjeet Singh told reporters on a conference call. "The overall acquisition agenda remains strong." Last quarter, Chief Executive Jeya Kumar had said Patni expects to spend $200 million to $300 million on acquisitions for the year ending Dec. 31.

Singh said Patni would be looking for acquisitions across all verticals, but mainly in the infrastructure management services space, a weaker portfolio it wants to shore up.



CAUTIOUS Q4

For the fourth quarter, Patni forecast net profit of $22.5 million to $23 million on a constant currency basis on revenue of $180 million to $181 million.

"Most of the volume growth would be back-ended in the fourth quarter, so we are guiding with caution," Singh said. He expects Patni's margins to be flat in Oct-Dec on absolute terms and dip slightly on an operating basis sequentially, dragged by lower capacity due to the seasonal holidays. September-quarter gross margins were at 33.9 percent, compared with 35 percent in the previous quarter.

The company, which ended the quarter with a headcount of 16,556 people, plans to hire close to 1,000 employees in Oct-Dec, Singh said, adding he expects attrition to reduce in Q4. Small and mid-cap IT companies have been grappling with tepid demand, high attrition rates and a rise in expenses, resulting in strain on margins and reduced profitability for some.

Earlier in the day, Patni posted a lower-than-expected decline in quarterly profit, partly on a boost from product engineering segment sales, which rose to Rs 141 crore from Rs 118 crore a year ago. The company, which added 13 new clients during the quarter, said its consolidated net profit fell 14.3 percent to Rs 144 crore, while a Reuters poll of brokerages had forecast profit at Rs 120 crore, a 28.6 percent drop.

Patni said it expects a mark-to-market foreign exchange gain of $1.5 million in the December quarter, but flagged the strongly appreciating rupee as an overall concern for the industry.

Patni's larger peers, Infosys Technologies , Wipro and Tata Consultancy have also voiced concerns about a strong rupee crimping profits at India's $60 billion software services sector, which gets more than half of its revenue from exports and counts costs in rupees.