The Indian IT services industry is projected to clock mild growth in revenue in the current fiscal year, a report by ICRA revealed. The domestic industry is estimated to witness a muted revenue surge for the second consecutive year in the 2024-25 fiscal year (FY25) at 4-6 per cent.
However, ICRA stated that the industry’s operating profit margin (OPM) is expected to remain robust at nearly 22 per cent in the current fiscal year, reported The Financial Express. This growth in the margins was attributed to a fall in attrition levels which are expected to stabilise in the near term.
Sharing the outlook for the industry, the report said that the future looks stable backed by a well-established business position, anticipation of steady earnings and cash flow generation, and robust balance sheets of the players in the industry.
Deepak Jotwani, VP and Sector Head, Corporate Ratings, ICRA noted, “ICRA expects FY2025 to be the second consecutive year of muted revenue growth (for its sample set companies), estimated at 4-6 per cent, given the lower discretionary technological spends by clients amidst persistent macro-economic uncertainty in the key markets of the US and Europe.”
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The executive commented that revenue conversion of the orders has slowed down, however, the order book and deal pipeline of the majority of the IT services firms stay robust. “This, coupled with the increasing prominence of technological spend by clients as part of their overall capital allocation strategy, is expected to support the growth momentum once the macroeconomic headwinds subside over the medium term,” Jotwani added.
The report noted that hiring by the players in the industry remained under pressure recently due to a slowdown in demand, and a rise in the utilisation of surplus manpower capacity in the 2022-23 fiscal year.