Business Economy

IT services industry to accelerate by 9 to 12 pc in FY22, says ICRA

New Delhi [India]: The USD revenue growth of sample IT services companies are expected to be 9 to 12 per cent in FY2022, driven by robust demand for digital technologies resulting in higher awards of contracts, according to investment information agency ICRA.
Further, the growth will be supported by the pent up demand of FY2021 which was lower due to the initial impact of Covid-19. For FY2023, the rating agency estimates the growth to be 6 to 9 per cent. In Q1 FY2022, the ICRA sample of eight companies recorded revenue growth of 18.1 per cent in rupee terms and 16.2 per cent in USD terms, primarily led by the low base of last year (Covid-19 impact) and acceleration of digital outsourcing deals amid the pandemic.
The rupee appreciated by 2.8 per cent vis-a-vis the US dollar on a Y-o-Y basis which negatively impacted the revenue growth of IT services companies in rupee terms in Q1 FY2022.
In FY2021, the sample of 13 companies witnessed a Y-o-Y growth of 5.9 per cent in revenues in rupee terms and 0.6 per cent in US dollar terms impacted by the pandemic.
In FY2021, the rupee depreciated by approximately 4.7 per cent / 7.7 per cent / 9.8 per cent Y-o-Y vis-a-vis the USD/GBP/Euro respectively which supported the growth in rupee terms.
Gaurav Jain, Vice President and Sector Head at ICRA, said IT services companies have managed to overcome supply-led challenges through uninterrupted delivery of IT services through the work-from-home model.
“As a silver lining, the pandemic is accelerating the secular trends of core modernisation, usage of collaborative technologies and cloud migration as companies shift to digital business models to pursue work-from home model, which will benefit the IT services companies.”
In H1 CY2021 (January to June), traditional sourcing witnessed an annual contract value of USD15.2 billion, up by 15 per cent on a Y-o-Y basis owing to accelerated demand for digital technologies.
Enterprises have shifted to virtual models that have pushed the acceleration of digital outsourcing deals. Further, risks related to H-1B visas issuances have slightly abated with the election of the new US administration in February.

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