Despite expectations of modest revenue growth, credit rating agency ICRA maintained its stable outlook on the Indian IT services industry, “led by a well-established business position, expectations of healthy earnings and cash flow generation, and strong balance sheets of the industry players.”

“The banking, financial services and insurance (BFSI) and telecom segments have contracted more than the others. Nonetheless, critical spending and cost optimisation deals continue to gain traction, supporting the growth prospects for the Indian IT services companies to some extent,” said Deepak Jotwani, Assistant Vice President and Sector Head, ICRA.

ICRA expects a likely pick-up in the growth momentum once the macroeconomic headwinds subside.

The credit rating agency also expects hiring to remain muted in the near term with gradual pick-up until the growth momentum improves.

“Moreover, attrition levels are expected to stabilise over the near term, inching closer to the long-term average of 12-13 per cent, as overall slowdown in growth momentum and strong hiring in the previous fiscal has corrected the demand-supply mismatch witnessed earlier,” Jotwani noted.

The Indian IT services industry continues to have a net cash surplus position with strong liquidity owing to high level of operating cash flows and modest capex and working capital requirements.