Indian IT Services Industry Eyes 3-5% Growth In FY25: ICRA Report

New Delhi, Mar 19 (KNN) The Indian IT services industry is anticipated to witness a modest revenue growth of 2 per cent in the initial three quarters of FY24, with expectations to maintain a restrained trajectory ranging from 3-5 per cent in FY25, according to a recent report released by ICRA on Monday.

This marks the second consecutive year where the credit rating agency has projected growth rates within the 3-5 per cent range for the Indian IT sector.

The agency expects the operating profit margins for the sector to remain healthy at around 21-22 per cent in FY25. ICRA, however, expects a likely pick-up in the growth momentum once the macroeconomic headwinds subside.

The US saw a sharper moderation in growth compared to Europe, with a slowdown in the revenue conversion of orders. However, the ICRA report notes that the order book and deal pipeline of most companies remain robust.

Several top IT services firms have reported record levels of total contract value (TCV). For example, Tata Consultancy Services (TCS) reported a TCV of USD 8.1 billion in Q3FY24, following TCVs of USD 10.2 billion and USD 11.2 billion in the first and second quarters, respectively.

Additionally, hiring within the industry has remained subdued over the past five quarters, with a negative net addition attributed to demand moderation and increased utilisation of excess capacity added in the previous financial year.

Despite substantial dividend pay-outs, share buybacks, and inorganic investments, the majority of industry players are expected to maintain a strong financial profile, supported by robust cash flow generation, lower debt levels, and strong liquidity, as highlighted in the report.

ICRA also underscores the evolving dynamics of consumer demand post-pandemic, emphasising the integral role of technology spend in the overall capital allocation strategies of corporates.

(KNN Bureau)