Accelerated digitisation to drive 9-12 pc dollar revenue growth for domestic IT services firms: ICRA

Industry growth is expected to moderate marginally to 6-9 per cent in FY2023, partly also on account of the base effect, ICRA said in a statement.

However, concerns have emanated from elevated attrition levels for the industry due to strong demand for digital technologies and lack of adequate skilled manpower to service the same.

Domestic IT services companies are expected to log a dollar revenue growth of 9-12 per cent in FY2022, driven by accelerated demand for digital technologies from enterprises globally and partly on account of low base of last year due to the COVID-19 impact, ratings agency ICRA said on Tuesday.Industry growth is expected to moderate marginally to 6-9 per cent in FY2023, partly also on account of the base effect, ICRA said in a statement.

“In line with the growth trajectory witnessed over recent quarters, Indian IT services companies are expected to report healthy growth over the near term due to aforementioned favourable factors,” ICRA Assistant Vice-President and Sector Head Deepak Jotwani said.He added that this growth has been supported by uptick in all key verticals such as BFSI, telecom, manufacturing, retail and distribution.

However, concerns have emanated from elevated attrition levels for the industry due to strong demand for digital technologies and lack of adequate skilled manpower to service the same.Companies are reskilling employees to overcome this challenge.Moreover they have also been able to achieve higher employee productivity through increased deployment of technology.

Hiring by IT companies is at an all-time high buoyed by strong demand and net addition over past four quarters has been increasing exponentially, Jotwani noted.ICRA said IT services companies remain focused on enhancing the share of fixed price contracts as it assures better revenue visibility and also allows for higher deployment of offshore resources where the salaries are 60-70 per cent lower, coupled with better utilisation of manpower across such projects and deployment of automation.

The benefits are shared with the client leading to mutual advantage.The share of fixed price contracts has remained between 60-65 per cent in the past three years, ICRA said.There was some increase in H2 FY2021, which has tapered to around 61 per cent levels in the second quarter of FY2022, given the higher share of new contracts and mix of contracts secured.

“ICRA has a stable outlook on the Indian IT services industry, led by minimal impact of the pandemic on revenues and profitability and steady earnings outlook over the near to medium term,” Jotwani said. 

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