Indian IT services sector's revenue growth to stabilise at 11-13%: Moody's

Economic stability in developed countries will fuel growth in the IT services sector benefiting Indian companies, which will see revenue growth stabilise at around 13%, Moody's Investors Service said on Wednesday.

It forecast that the Indian IT sector will maintain global market share gains, supported by a wider coverage and operating efficiency, albeit at a moderate pace.

"Revenue growth for the Indian IT services sector will stabilise at 11-13%, with the bottoming-out of the slowdown witnessed by the industry over the past 12-18 months," said Moody's in a report on IT services.

Economic stability in developed countries -- which account for 90% of Indian IT exports -- will fuel growth for the global IT services outsourcing industry, helping Indian software players, in particular, said Moody's VP and Senior Analyst Kaustubh Chaubal.

However, the report noted that currency volatility will pressure growth estimates. While the rupee has seen a sustained depreciation against the dollar since April 2011, the latter is appreciating against other major currencies, leading to cross-currency volatility and conversion impact on growth estimates.

"While revenue is predominantly denominated in US dollar and euro for the Indian IT services sector, the cost base remains primarily denominated in the rupee, resulting in a potential mismatch," Chaubal said.

According to the report, revenue growth for Indian IT companies slowed to 13% in 2014-15, from 23.2% in 2010-14 due to various headwinds, including sluggish developed economies, constrained IT budgets, evolving delivery models like cloud computing and pricing pressure.