The Indian IT services sector is projected to see modest revenue growth, with estimates hovering around mid-single digits for the financial year 2024-25, according to Fitch Ratings. This modest growth is attributed to the likelihood that clients may postpone discretionary IT spending due to prevailing economic uncertainties. Fitch anticipates that the sector will continue to be impacted by subdued spending, as clients remain cautious amid concerns over economic growth and the uncertain timing of interest rate cuts. However, spending on projects aimed at improving cost efficiencies is expected to continue.
Larger Indian IT services companies are expected to maintain strong financial positions, with Fitch forecasting pre-dividend free cash flow margins of 15-18% for these firms, thanks to their large net cash reserves and robust cash flow generation. Additionally, Indian banks have seen improvements in capital buffers in recent years, bolstered by increased accruals and capital-raising efforts. This should enable them to absorb the effects of IFRS implementation without hindering loan growth, despite a slight decline in internal capital generation.
The Indian IT services sector is expected to experience moderate growth as clients may defer discretionary IT spending due to economic uncertainties, according to Fitch Ratings. However, larger firms are likely to maintain their strong financial health.
