The IT Services Playbook

intermediate7 min read

People businesses billed by the hour: constant-currency growth, margins, attrition and deal wins tell the whole story.

An Indian IT major is a machine that hires engineers, bills their hours to global clients in dollars, and pays them in rupees. Its dashboard has four dials: how fast revenue grows in the clients’ currency, how much of each billed dollar survives as profit, whether the talent stays, and whether tomorrow’s work is already signed.

Constant-currency (cc) revenue growth — growth with exchange rates frozen: the true demand signal (rupee depreciation can fake growth).
EBIT margin — 20%+ for tier-1; the wage-hike vs pricing tug-of-war shows up here first.
Attrition — above ~20% means wage costs rise and delivery quality wobbles; the culture meter.
TCV / deal wins — total contract value signed this quarter: the order book that becomes next year’s revenue.
Utilisation + headcount adds — engineers billed vs benched; hiring freezes precede revenue slowdowns by ~2 quarters.

The non-obvious lever is the rupee: a 5% depreciation drops almost straight into margins (costs in ₹, billing in $), which is why IT stocks often rally when the rupee weakens. But treat it as a cushion, not a strategy — currency gives one-off margin gifts while cc-growth and deal wins are the compounding engine. An IT company whose margins hold ONLY because of currency while cc-growth stalls is a melting business with a nice paint job.

ExampleCompany X reports 12% rupee revenue growth — headlines cheer. The fine print: cc growth 4%, the rest is currency; TCV down 18% year-on-year; utilisation up (good?) but headcount FLAT for three quarters — the clearest tell that management does not expect demand. The stock’s 25× P/E is pricing an acceleration the order book contradicts.

Test yourselfRupee revenue grew 11%, constant-currency revenue grew 3%. What is the honest read?

Demand grew only ~3% — the other ~8 points are exchange-rate translation, which clients did not pay and which can reverse. Value the business on cc-growth and deal wins; treat currency as weather.

✓ You learnedRead IT on constant-currency growth, EBIT margin, attrition, and TCV — with headcount as the leading indicator management can’t spin. Currency moves margins short-term; only demand compounds. High P/E + stalling cc-growth + shrinking order book is the sector’s classic value trap.

FAQs

Why do IT stocks fall when US rates rise?

Two transmissions: US/European clients cut discretionary tech spend when their own economies tighten (demand), and high global rates compress the P/E multiples of long-duration earners everywhere (valuation). IT is an Indian-listed play on WESTERN corporate budgets — its cycle follows theirs, not India’s.