Prajna Capital - An Investment Guide

IT Firms will see their EBITDA margins plunge below 20% over the next 3 years TOP Indian tech firms such as TCS, Wipro and HCL will see their EBITDA margins, a measure of operating profit, plunge below 20% over the next three years, as these companies move more information technology projects to India, and align their operations with rising wages apart from the currency fluctuations. Leading outsourcing customers such as General Electric, Royal Bank of Scotland and Bank of America plan to increase their offshore outsourcing in order to lower their cost of managing IT in the US and UK, where billing rates are more than twice of what can be achieved by sending work to offshore locations such as India. It’s going to be growth vs margin dilemma for us — till now, we have protected our margins and fared better than the likes of IBM and EDS. However, in the long run, I would say that even 15% of EBITDA will stand much better than our rivals who hardly achieve 10%. EBITDA (short f...