IT Companies in India Show Promising Growth in FY25
IT companies in India are set for better revenue performance in the second quarter of FY25, with growth expected between 0.0% and 2.5% for Tier 1 firms, according to a Centrum report. This improvement is due to new deals and better conversion of Total Contract Value (TCV) to revenue. The reduction in deal leakages compared to FY24 is also a positive sign for the sector.
Despite challenges in key markets like the US and Europe, early recovery signs are visible, especially in sectors like Banking, Financial Services and Insurance (BFSI), Technology, Media and Telecommunications (TMT), and Manufacturing. Healthcare and Manufacturing sectors continue to show strong demand, helping offset broader market challenges.
Growth forecasts for major companies include 1.7% for TCS, 2.5% for Infosys, 1.0% for HCL Tech, 0.0% for Wipro, and 0.5% for Tech Mahindra. Infosys is expected to lead among Tier 1 companies, while Coforge is projected to top Tier 2 companies with 4.0% growth. Tier 2 companies are expected to grow between 1.9% and 4.0%, driven by better operations and demand in specific sectors. Top performers include LTIMindtree (2.8%), LTTS (3.8%), and Happiest Minds (2.0% organic).
The Indian Rupee’s depreciation against the US Dollar by 0.4% and cross-currency benefits are expected to support growth in INR terms. The IT sector is also focusing on productivity, utilisation, and operating margins. Companies aim to improve margins by reducing subcontracting costs, optimising employee structures, and controlling wage increases. Employee attrition has stabilised, enhancing operational efficiency.
Generative AI-based solutions are expected to drive medium-term growth, with many IT firms developing Gen AI offerings. As companies prepare for Q3FY25, management’s insights on demand, revenue, and margin guidance for FY25 will be crucial.
Doubts Revealed
FY25 -: FY25 stands for the financial year 2025. In India, a financial year starts on April 1st and ends on March 31st of the next year. So, FY25 would be from April 1, 2024, to March 31, 2025.
Infosys -: Infosys is a large Indian company that provides technology services and consulting. It helps other businesses with their computer systems and software needs.
TCS -: TCS stands for Tata Consultancy Services. It is one of the biggest IT services companies in India and helps businesses around the world with technology and consulting services.
Tier 1 firms -: Tier 1 firms are the largest and most established companies in an industry. In the context of IT, these are companies like Infosys and TCS that have a big market presence and influence.
TCV conversion -: TCV stands for Total Contract Value. TCV conversion refers to how well a company turns its contract opportunities into actual revenue. It’s important for understanding how successful a company is in securing and executing deals.
Deal leakages -: Deal leakages refer to the loss of potential business deals or revenue. It happens when a company fails to secure a deal or loses it to a competitor.
BFSI -: BFSI stands for Banking, Financial Services, and Insurance. It is a sector that includes banks, financial institutions, and insurance companies.
TMT -: TMT stands for Technology, Media, and Telecommunications. It is a sector that includes companies involved in technology, media, and communication services.
Coforge -: Coforge is an Indian IT services company that provides software solutions and services to businesses. It is considered a Tier 2 company, which means it is smaller than Tier 1 companies like Infosys and TCS.
Generative AI -: Generative AI is a type of artificial intelligence that can create new content, like images, text, or music. It is used to improve productivity and create innovative solutions in various industries.