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Given the ongoing liquidity crisis, drawn out financial restatement process, material litigation exposure, despondent employee morale, damaged brand and looming client disengagements – it appears that mere survival will rest on the ability of management to engineer a quick sale or cash infusion on distressed terms. In the absence of such an outcome, the ADSs could be virtually worthless, e.g., we note that even an overcapitalized, profitable and untainted player like Patni (PTI) has an enterprise value that translates into <10% of calendar 2009E revenue and <1.0x EBITDA.

Investment Conclusion

Based on slow IT spending in a deepening global economic downturn – with above-average exposure to the troubled Financial Services segment – we are reducing our estimates as follows: 2009 GAAP diluted EPS to $1.50 on revenue of $2.955 billion (+5% YoY) from $1.60 on $3.103 billion; and 2010 GAAP diluted EPS to $1.60 – including a one-time jump in the tax-rate – on $3.406 billion (+15% YoY) from $1.75 on $3.723 billion. Our current model assumes no sustained upturn in revenue until the December 2009 quarter. In the present environment, any growth in revenue and EPS in 2009 should attest to the durability of a business model.

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