Ind-Ra maintains Stable Outlook for IT Sector
India Ratings & Research (Ind-Ra) has reportedly said that it has maintained a Stable Outlook on IT service providers for FY15 to reflect their stable credit profile, low debt levels and cash-rich balance sheet. However, better business conditions in Europe and North America will result in revenue growth for IT service providers in FY15.
Revenue growth for FY15 is likely to improve marginally from about 13% in FY14. The growth will be backed by an improving business environment and increased competitiveness of Indian exporters on the back of a depreciated rupee.
For FY15, EBITDA margins are likely to remain under pressure due to wage inflation in 1QFY15. Ind-Ra expects the Indian rupee to appreciate to around 56-57/USD by end-March 2015, which will further depress EBITDA margins. Margin erosion is expected to be partly offset by a stable pricing environment and disciplined bidding to pare low-margin contracts. Higher employee use as well as improvements in productivity levels will also help contain margin erosion.
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