Delay in payments from clients for Indian IT vendors ?
SOURCE: EconomicTimes
Date: June 15th, 2009
Primarily due to companies filing for bankruptcies and for newer deals, India vendors provide a more lax payment arrangement , there is a rise in receivable percentage by the outsourcing vendors. This issue is not specific to outsourcing vendors but is affecting majority of the vendors. The ones with financial services have taken the most hit. This should not have a long term impact on the outsourcing firms who are finding innovative ways to manage and deal with cash in these slow times. The challenge comes when firms file for bankruptcy and those have the highest impact on the outstanding receivables.
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Indian outsourcing firms are finding it hard to recover their dues from clients, a majority of which are in the crisis-hit US and Europe. As a percentage of their sales, the receivables of all the top three Indian IT exporters, except for Infosys Technologies, have shown a rising trend in the past few quarters.
The rise in the percentage of receivables, or the payments due from clients, indicates that the IT firms are facing difficulty in getting payments in time. Some of these could turn out to be bad debts, which may have to be written off in the event of the client defaulting or going bankrupt. This concern is also reflected in the rising provision for doubtful debts in the top three IT firms, Tata Consultancy Services (TCS), Infosys and Wipro.
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