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Indian IT Services Industry Anticipates Modest 3-5% Revenue Growth in FY25: ICRA
The Indian IT services industry anticipates a mild improvement in revenue growth, projected to rise from 2% in the current fiscal year to a modest 3-5% in FY2025. Despite this modest outlook, credit rating agency ICRA maintains a stable perspective on the industry. This stability is attributed to its well-established business position, anticipated healthy earnings, cash flow generation, and strong balance sheets of industry players.
Deepak Jotwani, Assistant Vice President and Sector Head at ICRA, noted that segments like banking, financial services, insurance (BFSI), and telecom have experienced contraction, but critical spending and cost optimization deals are gaining traction. These factors, albeit modestly, support growth prospects for Indian IT services companies. ICRA expects growth momentum to pick up once macroeconomic headwinds diminish.
Hiring in the industry is expected to remain subdued initially, with a gradual uptick as growth momentum improves. Additionally, attrition levels are forecasted to stabilize, nearing the long-term average of 12-13%. This stabilization is attributed to the overall slowdown in growth momentum and significant hiring in the previous fiscal year, which has corrected the earlier demand-supply mismatch.
The Indian IT services industry maintains a net cash surplus position, supported by strong liquidity stemming from high operating cash flows and modest capex and working capital requirements.
In summary, while the Indian IT services industry foresees modest revenue growth in the near term, the stable outlook is underpinned by its solid financial position, ongoing critical spending, and anticipation of a future growth resurgence once macroeconomic challenges ease.
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