A robust digital-transformation order pipeline will support Indian IT services companies' stronger revenue growth in the financial year ending March 2022 (FY22), according to Fitch Ratings.
"We believe the impact on Indian IT service companies from the recent surge of COVID-19 cases will be limited as revenue from India contributes only 4 to 5 percent of the total revenue of these companies," it said in a non-rating commentary. "However, their operations may be affected if the situation continues to worsen, such that more employees are unable to work and the delivery of projects is delayed."
Fitch forecasts top-tier Indian IT services companies including Tata Consultancy Services, Infosys, HCL Technologies and Wipro to record double-digit revenue growth in FY22. Infosys and HCL guided for 12 to 14 percent and double-digit constant currency revenue growth respectively in FY22 while TCS remained focused on achieving double-digit growth rates over the medium-term.
The top-tier companies' revenue rose by around 1 percent in constant currency terms in FY21. Fitch defines top-tier Indian IT companies as those with annual revenue of at least 10 billion dollars.
It said demand has increased significantly since last financial year as business customers accelerate efforts to offer enhanced online services and online working platforms to remain competitive and relevant in a business environment affected by the pandemic.
IT services spending will rise by 9 per cent in 2021 after a 2 percent decline in 2020. Fitch expects Indian IT companies to expand faster than the industry average as they have significant cost advantages compared with peers in developed countries due to lower labour costs.
