The steep depreciation of rupee in recent months will help IT companies as they will be able to offer better pricing to customers than global peers and win more contracts, said India Ratings.

“The weak rupee will help revenue growth, as the effect of translation increases the ability of IT companies to price better than global rivals. It will also make local IT services companies competitive and increase their chances of winning new and renewal contracts,” India Ratings said in a report.

However, the report warned that though the current forex trend is positive for the sector managing foreign exchange risks will remain a key credit factor, especially if the volatility in rupee’s exchange value continues.

Maintaining a stable outlook on the domestic IT services industry in the second half, the report says it expects liquidity of the companies to remain comfortable “due to their low debt levels and high cash balances, and positive free cash flows on continued contribution from the recurring and critical nature of IT services”.

Related Topics