Clients prefer to stick to dollars

Indian IT companies, hurting from the strengthening rupee, have not succeeded in pursuading clients to pay in currencies other than the dollar -- whether pounds, euros or yen. Worse, clients are unhappy over the hike in billings.

"We have had some IT firms asking our clients to shift to different currency billing and asking for an increase in billing rates," says an analyst associated with several US-based companies. "But these demands have not gone down too well with clients."

Close to 60 per cent of revenues of Indian IT service providers comes from the US market. With the rupee having appreciated more than 12 per cent over the past year, IT firms have increased billing rates, in most cases for new as well as existing clients.

But analysts think that hedging is the service providers' concern. "Why should the customer bear the brunt of market movements," asks Siddharth Pai, partner, TPI. "Any fluctuation in currency is the responsibility of the service provider. They can manage it either through natural hedging or financial hedging."

Rostow Ravanan, CFO and company secretary, MindTree Consulting, says, "It is difficult to make companies pay in any other currency. Even those European clients who have their internal budgets in dollars will not change their billing currency to Euros."

While companies are trying to reduce their dollar dependence, they will simply have to diversify to other geographies.

Deepak Khosla, senior vice-president, Patni Computer Systems, says, "Some players will renegotiate billing rates and clients might also understand and somewhere bear part of the Re-$ parity. While hedging is a short-term strategy, companies with almost 60 per cent of their revenues from the US will in the long-run need to focus on other geographies like APAC and Europe."

The incremental increase in billing rates is not going down too well with clients either. "The majority of work that is being done out of India is very mundane, such as application development. Customers are pushing back demands for increase in rates. Rather, they prefer to make these variations at the master service agreement negotiations," says Sudin Apte, senior analyst and country head - India, Forrester Research.