IT svcs FY26 revenue to grow 6-8%; operating profit seen steady, says CRISIL
This story was originally published at 15:04 IST on 27 March 2025
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--CRISIL:See IT svcs FY26 revenue growing 6-8%; operating profit seen steady
--CRISIL:See steady IT svcs FY26 revenue growth on continuing macro headwinds
--CRISIL: See steady IT svcs revenue growth on uncertainties in key mkts
--CRISIL: IT svcs operating profits healthy, led by modest employee addition
--CRISIL: IT svcs cos will see healthy deal wins with rising focus on AI
--CRISIL: IT svcs cos bundling AI-based offerings with traditional services
--CRISIL: IT svcs cos will continue to eye small-, mid-sized acquisitions
MUMBAI – The Indian information technology services sector is expected to sustain its 6-8% revenue growth in 2025-26 (Apr-Mar), amid continued macroeconomic headwinds and emerging uncertainties in the key markets of the US and Europe, ratings agency CRISIL said in a press release Thursday. The US and Europe contribute around 85% to the revenue of the domestic IT sector. This will mark the third consecutive financial year of mid single digit growth for the sector, CRISIL said.
The revenue growth of Indian IT companies will be supported by a currency depreciation benefit of around 2%, CRISIL said. This was based on a study conducted by the ratings agency of the top 24 Indian IT services providers, accounting for around 55% of the estimated industry revenue of around INR 1.5 trillion.
Revenue from the banking, financial services, and insurance and retail verticals, which contribute around 30% and 15% of the revenue of IT companies, respectively, saw a marginal recovery in FY25, growing 2% in constant currency terms, CRISIL noted. However, in FY26, revenue from these verticals is expected to remain subdued at 3-5%, amid slowing economic growth and cautionary discretionary spending, Anuj Sethi, senior director of CRISIL Ratings, said in the release. Further, revenue growth in the manufacturing and healthcare segments, which remained sluggish at 3-4% in FY25, is expected to remain at low single digits in FY26, due to policy uncertainties, Sethi added. CRISIL expects further spending on IT to remain focused on efficiency gains, consolidation, and optimising costs in the near term.
Despite this, the rating agency expects the operating profits of IT service providers to remain healthy and steady, led by modest employee additions amid low attrition. Companies are responding to the modest growth outlook by rationalising costs primarily through controlled headcount additions, which saw around 1% growth in the nine months till December FY25 after a dip in FY24. Aditya Jhaver, director of CRISIL Ratings, however, expects these companies to remain cautious on fresh hiring and focus on employee utilisation in FY26. The agency expects the operating margin of domestic IT companies to remain at 22-23%, with stable attrition rates of around 13%, and flexibility to optimise the onshore-offshore mix.
The healthy deal wins of IT companies are expected to continue with increasing focus on artificial intelligence and generative AI across all segments, CRISIL said. Domestic IT companies are also expected to continue focusing on small and mid-sized acquisitions that could enhance their product baskets and digital capabilities. Given the expectations of stable cash generation, strong balance sheets, and sizeable cash surplus, the reliance on debt by IT companies are expected to be limited, the report said.
Pointing at the downside risks, the agency said that the domestic IT sector will remain vulnerable to the increasing global capability centres being set up in India, and the sharper-than-expected slowdown in economic growth in key markets of the UK and Europe. End
Reported by Arya S. Biju
Edited by Akul Nishant Akhoury
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