India’s IT exports: Deliver the code, chase the cash

A Bengaluru technology company says it is still waiting for $672,102 from an overseas customer for work completed more than 19 months ago, highlighting the financial risks smaller Indian technology exporters face when international clients fail to pay.

Thiyagu Ganesan, founder of Ticvic Technologies Pvt Ltd, has sought the Karnataka government’s intervention. His petition says the company completed the contracted work and the customer’s technical team tested it and confirmed that it was functioning.

The contract shared by Ticvic shows a second-phase project worth $672,102, with payments linked to milestones and customer acceptance. In an email dated May 29, 2024, a customer representative wrote: “I tested it and found that the NAT function is fine.”

Mr. Ganesan said Ticvic had received payment for an earlier project and, trusting the relationship, proceeded with the second phase without the expected upfront payment. He personally mortgaged land and pledged gold to keep all 47 employees paid, expecting to redeem the assets once the customer settled the dues. The company’s operations have since shrunk significantly, leaving only a few employees.

Ticvic describes itself as a network software engineering company with international customers and an overseas project dating back to 2018. It says it has approached China’s Ministry of Commerce, the CCPIT Mediation Center and the Indian Embassy in Beijing, but the dispute remains unresolved.

Recourse for Indian exporters when customers refuse to pay

Phil Fersht, CEO and chief analyst of HFS Research, said the remedies depend largely on the contract. Companies can pursue debt recovery, arbitration or litigation, enforce letters of credit or bank guarantees, or claim export-credit insurance where cover was arranged beforehand.

However, cross-border recovery can become prohibitively expensive for smaller firms. “Pursuing a $500,000 or $1 million claim through another country’s legal system can take considerable time and money,” he said. Once software is delivered and accepted, “the supplier has already surrendered much of its commercial leverage.”

“Winning a $672,000 overseas contract is not a $672,000 export success until you collect the $672,000,” Mr. Fersht said.

India has mechanisms to assist exporters. The Directorate General of Foreign Trade’s trade-dispute mechanism covers non-payment involving goods, services and technology, while the Export Credit Guarantee Corporation offers insurance for software and technology exports.

But prevention remains crucial. “Insurance and government support work much better when the exporter has conducted proper buyer due diligence, documented acceptance criteria, maintained the necessary records and structured the transaction correctly from the outset,” Mr. Fersht said.

Gaurav Vasu, founder and CEO of UnearthInsight, said non-payment was not a widespread problem across India’s IT services industry. Large companies such as TCS, Infosys and HCLTech have diversified customer bases and sophisticated legal and credit-risk systems. Smaller firms, however, can be devastated by a single default.

A chief delivery officer at a technology MSME said companies typically rely on legal counsel, collection agencies and negotiations rather than government intervention. His company is seeking to recover about $1 million, with discussions under way to accept equity in the customer’s business instead of pursuing litigation.