The Indian IT (information technology) services sector will maintain its global market share gains, supported by expanding coverage and operating efficiencies, albeit at a moderate pace, Moody’s Investors Service has said.
“We expect Indian IT services companies to maintain market share gains while preserving their EBITDA (earnings before interest, taxes, depreciation and amortisation) margins in the 21%-22% range,” said Kaustubh Chaubal, a Moody’s vice-president and senior analyst.
“And economic stability in developed countries—which account for 90% of exports by the Indian IT services sector—will fuel growth for the global IT services outsourcing industry, benefiting Indian IT services companies in particular,” he said
However, currency volatility will pressure growth estimates, Moody’s noted. While the Indian rupee (INR) has seen sustained depreciation against the US dollar (USD) since April 2011, the USD is appreciating against other major currencies, leading to cross currency volatility and conversion impact on growth estimates.
“While revenue is predominantly denominated in USD and euro for the Indian IT services sector, the cost base remains primarily denominated in INR, resulting in a potential mismatch,” Chaubal stated.
He was speaking about Moody’s just released in-depth sector report on Indian IT services titled, “Market Share Gains Despite Headwinds.”