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The ratings agency ICRA has said that domestic IT services companies are expected to log a dollar revenue growth of 9-12 per cent in FY2022, driven by accelerated demand for digital technologies from enterprises globally and partly on account of low base of last year due to the COVID-19 impact. It said industry growth is expected to moderate marginally to 6-9% in FY23, partly also on account of the base effect. ICRA has a stable outlook on the Indian IT services industry, led by minimal impact of the pandemic on revenues and profitability and steady earnings outlook over the near to medium term.

ICRA said IT services companies remain focused on enhancing the share of fixed price contracts as it assures better revenue visibility and also allows for higher deployment of offshore resources where the salaries are 60-70 per cent lower, coupled with better utilisation of manpower across such projects and deployment of automation. The benefits are shared with the client leading to mutual advantage. The ratings agency said the share of fixed price contracts has remained between 60-65 per cent in the past three years. There was some increase in H2 FY2021, which has tapered to around 61 per cent levels in the second quarter of FY2022, given the higher share of new contracts and mix of contracts secured.

ICRA assistant vice-president and sector head Deepak Jotwani said ‘In line with the growth trajectory witnessed over recent quarters, Indian IT services companies are expected to report healthy growth over the near term due to aforementioned favourable factors’. He added that this growth has been supported by uptick in all key verticals such as BFSI, telecom, manufacturing, retail and distribution. However, concerns have emanated from elevated attrition levels for the industry due to strong demand for digital technologies and lack of adequate skilled manpower to service the same. Firms are reskilling employees to overcome this challenge.