{"id":34696,"date":"2024-04-24T23:11:01","date_gmt":"2024-04-24T23:11:01","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/04\/24\/it-service-companies-stare-at-second-year-of-muted-revenue-growth-at-5-7-crisil\/"},"modified":"2024-04-24T23:11:01","modified_gmt":"2024-04-24T23:11:01","slug":"it-service-companies-stare-at-second-year-of-muted-revenue-growth-at-5-7-crisil","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/04\/24\/it-service-companies-stare-at-second-year-of-muted-revenue-growth-at-5-7-crisil\/","title":{"rendered":"IT service companies stare at second year of muted revenue growth at 5-7%: Crisil"},"content":{"rendered":"
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The $250 billion information technology (IT) services sector is likely to see a second consecutive year of sluggish growth in fiscal year ending March 2025, with revenue seen rising 5-7%, according to Crisil<\/a> Ratings report. The subdued outlook is attributed to continuing global macroeconomic headwinds<\/a> lead to modest increase in technology spends<\/a> in the key markets of the US and Europe.
The FY25 growth outlook follows a 12% compound annual growth over the decade through fiscal 2024 and ~6% year-on-year (YoY) growth expected for fiscal 2024, Crisil said.<\/p>\n
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The overall IT industry, which employs around 50 lakh direct employees, has been going through a slowdown over the past 4-5 quarters.<\/p>\n

\u201cOperating margin, however, should sustain at 22-23% due to prudent management of employee costs (constitutes ~85% of total expenses and includes sub-contracting costs), through cautious hiring and with lower attrition reducing replacement cost,\u201d Crisil said in a report.<\/p>\n

For FY24, so far top three IT majors have reported subdued revenue but stable margins. TCS<\/a> led with revenue growth<\/a> of 6.8% to $29 billion, followed by Infosys<\/a> with $18.6 billion growing at 4.7% while Wipro<\/a> declined 0.8% with revenues at $10.8 billion in constant currency terms.<\/p>\n

The Crisil report points out study of top 24 firms, accounting for ~55% of the ~Rs 14 lakh crore sectoral revenue last fiscal. It looked at four sectors with ~65% of the revenue of the Indian IT services sector including banking, financial services, and insurance (BFSI; revenue share of ~30%), retail (~15%), technology (10%) and communications and media (10%).<\/p>\n

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Technology spend in these sectors saw muted growth in low single digits in fiscal 2024, amid high interest rates and economic slowdown in key markets.Aditya Jhaver, director, Crisil Ratings noted that given the slowdown in technology expected to continue this fiscal, revenue growth especially from BFSI and retail segments will continue to be a drag with subdued growth of 4-5%. While manufacturing and healthcare, which contribute a tenth of the revenue, will be the bright spots to grow at a healthy 9-10% given the focus on process automation and research and development-based analytics. \u201cIT spends will remain focused on automation and optimising costs, while most end-user industries are likely to defer large discretionary spends,\u201d he added.<\/p>\n

Moreover, IT service companies<\/a> pulled back on addition of fresh talent, resulting in headcount reductions by ~4% on-year in December 2023. This, along with the decline in attrition to ~13% as of December 2023 from the high of 20% in fiscal 2023 provided a breather by limiting higher-cost replacement hiring during fiscal 2024, it said.<\/p>\n

\u201cWe expect IT service providers to remain cautious on fresh hiring this fiscal, too, which will maintain employee utilisation at a healthy level of ~85%. With attrition remaining stable and only modest annual increments, operating margin will remain at 22-23%,\u201d said Joanne Gonsalves, Associate Director, Crisil Ratings.<\/p>\n

She added that continued healthy cash generation, strong balance sheets and sizeable cash surplus will keep the credit quality of IT service providers stable. Players will continue to eye acquisitions, especially small and mid-sized opportunities that could enhance their product baskets and increase digital capabilities.<\/p>\n<\/div>\n


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The $250 billion information technology (IT) services sector is likely to see a second consecutive year of sluggish growth in fiscal year ending March 2025, with revenue seen rising 5-7%, according to Crisil Ratings report. The subdued outlook is attributed to continuing global macroeconomic headwinds lead to modest increase in technology spends in the key […]<\/p>\n","protected":false},"author":2,"featured_media":34697,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","fifu_image_url":"https:\/\/img.etimg.com\/photo\/88591548.cms","fifu_image_alt":"","footnotes":""},"categories":[607],"tags":[771,38123,38124,569,5389,38122,38127,2891,17502,5807,38126,6179,38125,5384,568],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/34696"}],"collection":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/comments?post=34696"}],"version-history":[{"count":1,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/34696\/revisions"}],"predecessor-version":[{"id":34698,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/34696\/revisions\/34698"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media\/34697"}],"wp:attachment":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media?parent=34696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/categories?post=34696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/tags?post=34696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}