IT services sector's revenue growth to slow down to 3% in FY24: Icra
IT services sector's revenue growth will slow down to 3 per cent in the current fiscal from 9.2 per cent in the previous financial year, a domestic ratings company said on Tuesday.
Icra Ratings said the profitability will also take a beating in this financial year and the operating profit margin will narrow by up to 1 percentage point to 20-21 per cent.
The topline growth will come down to 3-5 per cent in FY24 from the 9.2 per cent posted in FY23, the agency said, attributing the slowdown to softening demand.
The agency's sector head Deepak Jotwani said there has been «persistent uncertainty» in the key markets for IT companies which has resulted in pauses and deferral of non-critical projects and slowdown in discretionary IT spends by key sectors like banking, financial services and insurance, retail, technology and communication.
As per industry lobby Nasscom, the sector directly employs over 50 lakh people while analysts say it was crucial for the post-pandemic recovery of the economy because of the impressive growth in the sector as demand for technology inputs grew.
Jotwani said lower operating leverage will limit the impact of the slower revenue growth on the profitability, and the ability of most companies to work with multiple levers such as onshore-offshore mix, employee utilisation levels, employee pyramid optimisation, and ability to manage costs will help.
The agency said Indian IT services companies witnessed a sharp moderation in growth momentum between Q3 FY23 to Q1 FY24 owing to the evolving macroeconomic headwinds in key markets of the US and Europe.
Its sample set recorded a revenue growth of 3.8 per cent in the first quarter in USD terms, the lowest in the last 10 quarters, the agency said, adding
