Global macro headwinds may moderate growth for Indian IT industry: Icra

The evolving global macroeconomic headwinds could moderate growth for Indian IT services industry over the medium term, ICRA said on Wednesday.

Rating agency ICRA, in its recent research report, has cited that given the Indian IT services industry generates about 60-65 per cent of revenues from the US market and 20-25 per cent from the European market, it remains susceptible to macroeconomic uncertainties and adverse regulatory changes in these key operating markets.

Deepak Jotwani, Assistant Vice President and Sector Head of ICRA, said: "Growth in the BFSI (Banking, Financial Services and Insurance) segment, one of the key segments for IT companies, has tapered more than other segments in recent quarters, and this is partially attributable to lower lending activity".

If the macroeconomic headwinds persist, the mortgage lending and the retail segments are expected to witness relatively higher moderation in growth, compared to the manufacturing and healthcare segments.

"While the current healthy order book position from clients will support healthy growth over the near term, the evolving macroeconomic situation is likely to result in lower order inflows going forward," Jotwani said.

Management commentary across companies suggests that decision-making on incremental IT spending has slowed down, with the focus shifting towards prioritising critical projects, according to ICRA.

The industry is also grappling with a surge in employee attrition in recent times, led by the demand-supply gap, especially for digital tech talent.

"ICRA, however, maintains its stable outlook on the sector as it expects minimal impact on the credit profile of most of the industry players as their balance sheets remain strong," Jotwani informed.

That said, a stretch in the receivables cycle (especially for smaller entities and captive units) and impact of debt-funded inorganic investments remain the key monitorables for select issuers, he noted.