IT sector staring at 2nd straight year of muted growth: Report

Treibune News Service

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Chandigarh, April 24

The IT services sector is likely to see a second consecutive year of sluggish growth this fiscal, with revenue seen rising 5-7 per cent, as continuing global macroeconomic headwinds lead to modest increase in technology spends in the key markets of the US and Europe, according to Crisil ratings.

This follows a 12 per cent compound annual growth over the decade through 2023-2024 and 6 per cent on-year growth expected for the previous financial year.

However, operating margin would sustain at 22-23 per cent due to prudent management of employee costs (which constitutes 85 per cent of total expenses and includes sub-contracting costs), through cautious hiring and with lower attrition reducing replacement cost.

A Crisil Ratings study of the top 24 firms, accounting for 55 per cent of the Rs 14 lakh crore sectoral revenue last fiscal, indicates as much. Four sectors account for 65 per cent of the revenue of the Indian IT services sector — banking, financial services, and insurance (30 per cent), retail (15 per cent), technology (10 per cent) and communications and media (10 per cent).

Aditya Jhaver, Director, CRISIL Ratings, says “The slowdown in technology spend will continue this fiscal, weighing on the revenue growth of IT service providers.”