Stable outlook for IT services sector in 2012: Fitch
03 Feb 2012
Despite an expected moderation in revenue growth in 2012 from 2011 levels, the outlook for the Indian IT services sector is stable on the back of its strong liquidity position.
In its IT services sector outlook for 2012, 2012 Outlook: Indian IT Services Fitch Ratings said, revenue growth may decline from a slowdown in the demand for IT services because of uncertainty regarding economic growth in the key markets of US and euro zone.
Despite an expected moderation in revenue growth in 2012 from 2011 levels, the outlook for the Indian IT services sector is stable on the back of its strong liquidity position.
Revenue growth may decline from a slowdown in the demand for IT services because of uncertainty regarding economic growth in the key markets of US and eurozone.
Fitch notes employee hiring increased in 2011 in anticipation of improving demand in the sector, resulting in higher wage costs; and thus negatively impacted EBIDTA margins for the nine-month period ended December 2011.
The moderation in revenue growth is likely to exert further margin pressures, though the depreciating Indian rupee, which lost around 15 per cent of its value against the US dollar during January-December 2011, is likely to provide some relief to the margins over the short-term as about 60 per cent of Indian IT export contracts are dollar-denominated.
However, over the medium-term, some of the advantage may erode due to the increasing competition.
