A new report by Fitch Ratings has said that the outlook for the IT service sector in Indian is stable. The company sees a strong liquidity position for the sector in the year even as there might be a slowdown in demand for IT services from important markets including the US and European countries.
The report said that the sector say increased hiring in 2011 due to hopes of a hike in demand and this put more pressure on EBIDTA margins for the nine-month period ended December 2011. The fall n revenues in the year will put more pressure on margins in the sector in the year.
On the other hand, the depreciation of the India rupee is expected to help the sector over the short-term as about 60% of Indian IT export contracts are based on the US dollar. The indain rupee has become the worst perfoming current in Asia in 2011 and has lost around 15%% of its value against the US dollar during January-December 2011.
Fitch says that the liquidity position on the sector will continue to be conformable throughout the year mainly due to high cash balances, low debt levels and positive free cash flows from the recurring and critical nature of IT services.