Patni's 4Q 09 revenues guidance implies modest sequential growth, ranging between 0.5% – 1.1%. This is lower than its 3Q 09 growth performance on account of fewer working days in the quarter. Management's 4Q 09 guidance also trails guidance provided by larger peers. We believe this growth will be achieved mainly through volumes as we expect pricing pressure to continue and have not ruled out the possibility of further re-negotiations by IT clients, particularly on larger deals. Although Patni's 4Q 09 guidance implies a y-o-y decline, the rate of decline is slowing, indicating a stabilized demand environment. Our outlook for the Indian IT services sector has improved and factors driving this change are present at both the macro level and company specific performances and guidance. We expect FY 2010 revenues to revert back to a positive growth trend. However, we see limited upside potential for further margin expansion and expect the company's margins to move in a narrow range from current levels as we believe margin levers such as improvement in utilization, favorably managing onsite-offshore revenue-mix, deferring wage hikes and reducing the number of benched employees have already been stretched. We believe long-term prospects for the Indian IT services sector remains strong post recovery in economic conditions world over as demand for IT outsourcing remains and continues to grow. For Patni to enter the big league of Indian IT firms, an acquisition is key in our opinion, which would provide a boost to the company's revenue growth rate. Equally important is reducing its dependency on the US and UK as revenue generating geographies and expanding into regions with higher growth potential such as the Middle East and BRIC nations, in order to narrow the gap in multiples with its larger as well as mid-cap peers. Therefore, although we expect a turnaround to growth in next fiscal year, we downgrade the stock to a HOLD as the significant run-up in stock price has capped the upside potential based on fundamental factors.

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