The USD revenue growth of leading IT services companies is expected to be around 9-12 percent in FY2022, driven by demand for digital technologies resulting in higher awards of contracts.
Further, the growth in FY2022 will be supported by pent up demand of FY2021, which was lower due to the initial impact of Covid-19. For FY2023, the anticipated growth will be around 6-9 percent.
The ICRA sample of eight companies recorded a revenue growth of 18.1 percent in INR terms and 16.2 percent in US$ terms in Q1 FY2022, primarily led by low base of last year and acceleration of digital outsourcing deals amid the pandemic. The rupee appreciated by 2.8 percent vis-a-vis the US dollar on a Y-o-Y basis, which negatively impacted the revenue growth of IT services companies in rupee terms in Q1 FY2022.
In FY2021, 13 companies witnessed growth of 5.9 percent in revenues in rupee terms and 0.6 percent in US dollar terms, impacted by the pandemic.
“The pandemic is accelerating the secular trends of core modernisation, usage of collaborative technologies and cloud migration as companies shift to digital business models to pursue work-from-home model, which will benefit the IT services companies,” Gaurav Jain, Vice President and Sector Head, ICRA, said.
In H1 CY2021 (January-June 2021), sourcing witnessed annual contract value (ACV) of US$15.2 billion, up by ~15 percent, due to accelerated demand for digital technologies.
In Q1 FY2022, the operating profit margin (OPM) for the ICRA sample set (comprising eight companies) was 24.9 percent, lower than 25.6 percent in Q1 FY2021, impacted by wage inflation.
