Valuation Pulse – IT and ITeS industry - Q1 FY22

With a USD 3,000 million y-o-y increase in transaction values, industry reaches pre-COVID-19 levels of recovery driven by high demand and liquidity, revenue inflow, increase in M&As and focus on operational excellence.

"Continued and sustained efforts on cost control measures, focus on data localisation and acquisition of technologies and IT consultancies that provide cloud management, data and business analytics, robotic process automation services etc., coupled with recovery in revenue, have led to strong uptick in margins of IT & ITes companies. Such targeted spends have increased and is expected to grow, as corporates continue to invest aggressively in their digital transformational journey," says Manish Saxena, Partner, Growth, Grant Thornton Bharat.

Key trends in the sector

• Strong growth in revenue, primarily led by BFSI, retail and trade, life sciences and health-care verticals
• Deal wins, supported by accelerated hiring to meet the demand, have continued to remain strong in this quarter for all the IT companies, which provides a good visibility of revenue in the near-term
• Strong demand in areas of digital engineering, electric autonomous and connected vehicle (EACV), 5G and medical technology has supported revenue growth in the engineering IT sector
• Margins were impacted by wage hikes, higher hiring costs to backfill attrition and fulfill strong order book, increased sub-contracting and visa costs, offset partly by increase in offshore mix and operating leverage