IT industry to post strong recovery with 11% revenue growth in FY22: Crisil

On Wednesday, Crisil, a ratings agency, the information technology (IT) industry in India is expected to register a 11% revenue growth in FY22.

The growth is driven by rising demand for outsourcing and digital transformation services acceleration primarily from sectors such as manufacturing, healthcare, banking, financial services and insurance (BFSI), and retail.

As per NASSCOM, the IT services industry increased by 2.7% to US$ 99 billion in FY21. In last fiscal year, the broader industry comprising global back offices, business process management and e-commerce increased by 2.3% to US$ 194 billion.

Mr. Azim Premji, the founder chairman of Wipro, also anticipated a double-digit growth for the industry.

Crisil said, “The IT service firms are expected to register a healthy operating margin driven by increased business levels, and further profitable digital transactions (45% revenue share in FY21 versus 40% in FY20).”

 

Crisil's senior director, Mr. Anuj Sethi said, “Outsourcing of IT services is experiencing a steady increase globally as customers are concentrating on cost optimisation. The pandemic has opened up further prospects in digital services due to rise in remote working, automated services and e-commerce.

He added that deal wins by Indian companies increased by 20% YoY in FY21, with 80% of the digital deals across verticals.

The revenue growth in FY22 is estimated at ~4 percentage points higher than 6% in FY21.

BFSI accounts for 28% of IT service revenue and is expected to register a 13-14% growth in FY22, as compared to an increase of 9% in FY21, driven by increasing digital transactions share, continued data security and regulatory compliance.

Retail and manufacturing, together account for 30% of IT service revenues and are expected to grow 8-9% in FY22.

Healthcare accounts for 6% of IT service revenues and is expected to register a 15-16% growth in FY22, driven by increasing adoption of virtual services.

The report added that operating margins increased by 2 percentage points to a seven-year high of 25% in FY21, driven by cost savings from reduced travel, lower attrition levels and favourable onshore-offshore mix.

The agency anticipates sustained improvement in the credit quality of most IT companies, given their robust liquidity.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.