The $100 billion information technology (IT) services sector will stage a strong recovery this fiscal, with revenue growth of 10-11%, CRISIL ratings has said. The improvement will ride on increasing outsourcing and accelerating digital transformation services, accentuated by the pandemic, mainly in sectors such as banking, financial services and insurance (BFSI), healthcare, retail and manufacturing.
"Higher business levels, and more profitable digital deals (45% share in revenues in fiscal 2021, compared with ~40% in fiscal 2020) will also help IT services players maintain healthy operating margins. This, along with already healthy balance sheets will, in turn, lend a positive bias to the credit profiles of IT service providers," the ratings agency has said.
A CRISIL Ratings analysis of 18 firms, which account for 70% of the IT service sector's revenue, indicates as much.
Says Anuj Sethi, Senior Director, CRISIL Ratings, "With customers focussing on optimising costs, outsourcing of IT services is seeing a steady rise globally. The pandemic has opened up additional opportunities in digital services due to surge in remote working, e-commerce and automated services. Ergo, deal wins by Indian players have expanded by 20% on-year in fiscal 2021, with 80% of these being digital deals across verticals."
The revenue growth in fiscal 2022 will be almost 400 basis points (bps) more than the growth of 6% last fiscal and similar to 10% growth logged over fiscals 2018-2020. That said, revenue growth across business verticals will vary, CRISIL has said.