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Spurt in outsourcing, digital deals to drive IT rebound
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SME Times News Bureau | 07 Jul, 2021
The $100 billion information technology (IT) services sector is expected
to stage a strong recovery this fiscal, with revenue growth of 10-11
per cent, a report said.
The improvement will ride on increasing
outsourcing and accelerating digital transformation services,
accentuated by the pandemic, mainly in sectors such as banking,
financial services and insurance (BFSI), healthcare, retail and
manufacturing.
In its report, Crisil Ratings said that higher
business levels, and more profitable digital deals will also help IT
services players maintain healthy operating margins.
This, along
with already healthy balance sheets will, in turn, lend a positive bias
to the credit profiles of IT service providers, it said.
"With
customers focussing on optimising costs, outsourcing of IT services is
seeing a steady rise globally. The pandemic has opened up additional
opportunities in digital services due to surge in remote working,
e-commerce and automated services," Crisil Ratings Senior Director Anuj
Sethi said.
"Ergo, deal wins by Indian players have expanded by
20 per cent on-year in fiscal 2021, with 80 per cent of these being
digital deals across verticals."
As per the report, the revenue
growth in fiscal 2022 will be almost 400 basis points (bps) more than
the growth of 6 per cent last fiscal and similar to 10 per cent growth
logged over fiscals 2018-2020.
"That said, revenue growth across
business verticals will vary. BFSI, accounting for 28 per cent of IT
service revenue, will clock 13-14 per cent growth this fiscal due to
rising share of digital transactions, continued regulatory compliance
and data security," the report said.
"Retail and manufacturing,
which together account for 30 per cent of revenues, are expected to
recover 8-9 per cent after slowing down to 2-3 per cent last fiscal."
While
the rising number of online retail transactions and client push towards
digital marketing will drive growth in retail, manufacturing could
witness some pent-up demand from improving industrial activity globally,
the report said.
"Healthcare, though a small segment accounting
for 6 per cent of revenues, will sustain its high growth at 15-16 per
cent, benefitting from higher spending on tackling Covid-19 and
increasing adoption of virtual services."
"Other verticals
including oil & gas, communication, aerospace, defence and
transportation will see modest growth of 4 per cent, while travel &
tourism will remain muted this year too, as global travel is not
expected to improve significantly."
In addition, the report said
despite stronger revenue growth, operating margins are unlikely to rise
beyond the levels witnessed in fiscal 2021.
"Even with modest
revenue growth of 6 per cent operating margins expanded 200 bps to a
seven year high of 25 per cent last fiscal, mainly due to cost savings
from lower travel, favourable onshore-offshore mix, and lower attrition
levels."
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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