IT firms seek global rating

Domestic technology companies are increasingly looking at securing international credit rating as they seek to expand their global footprint through buyouts, industry and rating agency officials said.

"We are seeing considerable interest in international rating by Indian IT firms," R Ravimohan, managing director and regional head, Standard & Poor's, South Asia, said.

Indian IT service companies are seeking firms, product lines and ready customer access. "Transactions are likely to be selective in 2007, centring on acquisitions for new geographic markets or technology," Ravimohan said.

Also, given the trend and projected mergers and acquisition activity in the high technology sector in the region, "we may see some focused inorganic activity, mainly smaller companies which will most likely be financed by predominantly internal cash flows and the remainder by debt".

Late October, India's largest software exporter Tata Consultancy Services announced that Standard & Poor's rating services has assigned the company a corporate credit rating of BBB with a positive outlook.

While assigning a rating above that of India, S&P analyst Wee Lee Cheng noted that "the rating on TCS reflected the company's conservative financial policy and profile, it superior and improving cost efficiency, and improving business and customer diversity."

Two years ago, Infosys Technologies pierced India's sovereign rating. Ravimohan said rating on Infosys and TCS would likely be raised "if there is significant diversity in geographic, customer, industry, or product services offerings while maintaining operating margins above 25 per cent with modest risk profile and high liquidity position."