India IT services companies expect to grow 15% this year, 1.5x faster than 2020

India IT services companies expect to grow 15% this year, 1.5x faster than 2020

While salary hikes will raise costs, they will be offset through higher offshoring and better utilisation rates.

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Indian IT services companies are expected to grow at a faster pace in fiscal year 2021-2022 as businesses globally step up spending on digital transformation, online trading platform HDFC Securities said in a recent report.

“The pandemic has not just accelerated digitisation but has sharpened the operational engine. Key lead indicators remain strong with a recovery in consulting and slight improvement in deal market share,” HDFC Securities said.

Most services companies, which grew at about 10% on average in the previous year, are predicted to grow at a compounded annual growth rate (CAGR) of 15% in 2021-22 as revenue growth accelerates.

HDFC analysts expect that while most companies will allow salary hikes, they are not expected to have an impact on margins as it will be offset by gains through higher offshoring and better utilisation rates. 

The report said Indian Tier-I IT companies had won more orders than global majors in the fourth quarter. Mid-sized IT firms also outperformed their larger peers with some reporting double-digit growth.

HDFC Securities however cautioned that there were some concerns going forward given that the industry is still vulnerable to supply side-related costs and risks.

Across the board, the key growth drivers this year include a strong banking and financial services sector, which continues to see continued growth in tech spending, and a robust pipeline led by digital transformation and the rationalisation of IT systems and networks by businesses.

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