Indian IT services sector likely to resume high single-digit revenue growth in FY22: Fitch Ratings

Fitch Ratings in its latest report has stated that the IT services sector is likely to resume high single-digit revenue growth in 2021-2022 on the back of higher demand for digital transformation after a flattish 2020. It said that the impact of the Coronavirus pandemic is seen to be only moderate and short-term, as customers’ focus is on transforming their businesses digitally, moving services & work platforms online as well as minimise spending on legacy services.

According to the report, the pandemic would accelerate digital IT spends. It also added that most of the companies have reported robust deal wins, which may boost growth in 2021-2022, despite the revenue decline in the second quarter of 2020.

It projected that the Indian industry may continue to take benefit of its low-cost operations and sustain a strong position in the global IT landscape. It added that the industry will continue to remain export-driven as it mainly serves the US and Europe-based clients.

The report further said that the industry has seen an average growth rate of about 8 per cent during 2014-2019. It also said the impact of the US ban on new H1B and L1B visa applications is manageable. It noted that profitability, as measured by earnings before interest tax depreciation and amortisation or EBITDA margins, is likely to remain stable. It concluded by saying that strong demand for the services, Indian rupee depreciation, and cost-control measures, such as salary freezes during downturns, support stable profitability.