The Hindu Business Line : IT cos see little change in debtor days

A FEW quarters after the IT spending slump died out, Indian IT majors continue to see negligible change in debtor days. Debtor days is the ratio between receivables (i.e., payments due from clients for services rendered) and sales.

Debtor days relative to sales also point to cash flow trends. Increasing sales and a simultaneous slump in debtor days have a positive impact on cash flow. Most companies observed this trend. If sales decrease and debtor days also decrease, it means that cash flow management has improved, but there could be an impact due to decreased sales.

When debtor days increase while sales decrease, there will certainly be pressure on cash flow.

Satyam Computers has shown the most consistency in reporting a slump in debtor days comparing the December 2004 quarter with the immediately previous quarter as well as the year-ago quarter. But, in absolute terms, both Infosys and Wipro Technologies have debtor day figures that are much lesser.

HCL Technologies has seen a 10-per cent rise in debtor days between the December quarters in 2003 and 2004. MphasiS saw about 11 per cent increase in debtor days between the September and December 2004 quarters. It also saw the biggest slump between December 2003 and December 2004. Earlier this year, MphasiS had indicated that the BPO business had seen better figures for debtor days than had software. It had attributed this phenomenon to the `nature of contracts in the software business.' Debtor days for both the BPO and software businesses have been reducing for MphasiS.

It was noticed in the June 2004 quarter that Indian IT vendors had begun holding a tight leash on receivables. In the 12 months preceding that time, some companies had found it difficult to hold receivables under control. Polaris had seen debtor day figures of 103 for the March 2004 quarte,r but had attributed that to a change in its customer Citigroup's accounting processes.

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