Crisil Says Indian IT Services Sector To Stage Strong Fiscal Recovery
MUMBAI, India — Indian analytical firm Crisil published a report that said the country’s $100 billion information technology (IT) services sector would stage a strong recovery this fiscal year with revenue growth of 10-11 percent.
The report published on July 7 analyzed 18 firms that account for 70 percent of India’s IT Sector revenue.
The recovery will depend on increasing outsourcing and accelerating digital transformation services, mainly in sectors like banking, financial services and insurance (BFSI), healthcare, retail, and manufacturing, as per the report.
More profitable digital deals and higher business levels are also expected to help IT services players maintain “healthy operating margins,” the report said. This coupled with already healthy balance sheets, is expected to lend a positive bias to the credit profiles of IT service providers.
“With customers focussing on optimizing costs, outsourcing of IT services is seeing a steady rise globally,” said Anuj Sethi, Senior Director at Crisil Ratings.
“The pandemic has opened up additional opportunities in digital services due to surge in remote working, e-commerce and automated services. Thus deal wins by Indian players have expanded by 20 percent on-year in fiscal 2021 with ~80 percent of these being digital deals across verticals.”
The report said that revenue growth in fiscal 2022 would be almost 400 basis points more than the growth of around 6 percent last fiscal. The growth will be similar to around 10 percent growth over fiscals 2018-2020.
But despite stronger revenue growth, operating margins are not expected to increase beyond the fiscal 2021 levels.
“Indian IT industry expecting a strong recovery in 2021-22 with a growth rate of 11 percent from $194 billion in the previous fiscal 2020-21 underscores the massive increase in outsourcing & significant rise in adoption of digital transformation services in Banking, Finance services, and insurance,” tweeted Omkar Rai, Director General Software Technology Parks of India.
Banking, financial services, and insurance (BFSI), which account for about 28 percent of IT services revenue, will grow 13-14 percent this fiscal due to the rising share of digital transactions, continued regulatory compliance, and data security, Crisil said.
Retail and manufacturing, which together account for about 30 percent of revenues, are expected to recover 8–9 percent after slowing down to 2-3 percent last fiscal.
Healthcare, a small segment that accounts for about 6 percent of revenues, will sustain its high growth at 15-16 percent, profiting from higher spend on tackling Covid-19 and the increasing adoption of virtual services.
Other verticals, including oil and gas, communication, aerospace, defense, and transportation, will see modest growth of 4 percent, the report said. The travel and tourism industry will remain muted since global travel is not expected to improve significantly, Crisil said.
(With inputs from ANI)
(Edited by Abinaya Vijayaraghavan and Praveen Pramod Tewari)