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IT services sector’s revenue may contract up to 3% in FY21: ICRA
Jul-14-2020

Domestic rating agency ICRA in its latest report has said that Indian IT services sector’s revenue may contract up to 3 percent in the current financial year (FY21) versus earlier expectation of 6-8 percent, amid multiple challenges on the demand side. It also said that the profit margins for the sector will go down as the growth slows down.

The agency expects the pace of new contract award to fall by at least 7-9 percent in 2021, with manufacturing, travel, airlines, hospitality and retail to be the most adversely hit. It also said the first half of FY21 will also see impact in the form of price discounts and extended furlough requests by clients as they restructure their businesses. It noted that the only silver lining is the benefit IT companies stand to get through trends of core modernisation, usage of collaborative technologies and cloud migration as companies shift to digital business models to pursue work from home model.

As per the report, IT companies have achieved over 90 percent levels on the work from home front, acknowledging that the transition to work from home for the banking, financial services and insurance segment was impacted because of confidentiality issues. It added that there would be some issues which may come up due to the travel restrictions which are being imposed.

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