"During Q1FY2020, ICRA sample companies grew by 10.3 per cent in INR terms while in $ terms, it grew by approximately 7.4 per cent. During the quarter, INR depreciated by 3.7 per cent year-on-year versus $ and appreciated 1.9 per cent and 2.1 per cent versus GBP/EUR, respectively," it said.
The US and Europe collectively contribute 85 per cent of ICRA's sample set revenues.
"FY2020 IT services growth to remain at 6-8 per cent USD (terms)," it noted.
Demand is being driven by scaling up of solutions built around digital technologies (mobility, social, cloud, analytics and automation), ICRA Vice President(Corporate Ratings) Gaurav Jain said.
"The hitherto traditional outsourcing services such as custom application maintenance face pricing pressure and ERP (enterprise resource planning) applications are increasingly becoming consumer oriented - with application delivery mechanism shifting to cloud based environments," he added.
Adoption of digital technologies has reached inflexion point and is triggering large scale re-architecture programs, he explained.
"Despite pressure on growth and margins, the credit profile of Indian IT services companies is expected to remain stable underpinned by its ability to sustain free cash flows. The credit profile is also supported by net cash position with significant liquidity in the form of surplus investments generated out of past cash flows," it said.
Over the next decade, ICRA expects consolidation in the industry, especially among small and mid-size players, as margin pressure will intensify leading to lower returns for shareholders, Jain said.
"Geo-political issues restricting movement of skilled labour or increase in minimum salary requirement will have negative impact on the sector outlook," he added.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.