India’s IT sector to post solid double-digit growth between fiscal 2024 and fiscal 2027: Nirmal Bang Equities

New Delhi (India), September 10 (ANI): The Indian IT sector is poised for strong earnings growth in the coming years with a projected double-digit annual earnings per share (EPS) growth rate of 17.5 per cent during fiscal 2024-27, according to the latest industry analysis report by Nirmal Bang Equities.

The report highlights that this growth is driven by several key factors, including significant deal wins, stabilizing margins, and continued demand for digital transformation (DT) services, particularly in the areas of cloud computing, cybersecurity, and generative artificial intelligence (GenAI).

“We expect solid double-digit earnings per share growth (CAGR 17.5%) from fiscal 2024 to fiscal 2027,” the report reads.

The report indicated that in the first quarter of fiscal year 2025, the total value of deals won in this sector amounted to approximately USD 100.7 billion, an increase of 16.6% year-on-year, despite the broader market downturn.

The report indicates that this dynamic, combined with growing opportunities for digital transformation in the medium and long term, should improve the sector’s performance over the next three years.

The sector’s ability to streamline the operations of clients across industries, coupled with potential positive changes in consumer sentiment due to expected interest rate cuts by the U.S. Federal Reserve, could further unlock consumer spending, which would translate into economic growth.

The report said that in terms of revenue, the Nifty IT index is expected to grow at a compound annual growth rate (CAGR) of 8.5 per cent during fiscal years 2024-27, slightly above the estimated USD market compound annual growth rate (CAGR) of around 8 per cent.

However, this is expected to be lower than the 11 percent CAGR achieved in FY21-24, which was marked by a surge in discretionary spending. EPS growth during the period was 13 percent, mainly due to high employee and contractor costs resulting from a supply-demand imbalance in the labor market.

“We forecast Nifty IT revenue growth at 8.5 per cent CAGR in fiscal 2024-2027, which is slightly higher than the market estimate of around 8 per cent CAGR in USD terms, but lower than the around 11 per cent CAGR in fiscal 2021-2024, which was characterised by a sharp increase in discretionary spending,” the report added.

Looking ahead, the report said the IT sector is expected to see faster earnings per share growth, supported by several initiatives aimed at increasing margins, including pyramid rationalization, reduction of subcontractor costs, higher capital utilization rates and organizational restructuring.

It is worth noting that changes in the positions of general managers in six of the 11 companies analyzed in the report will bring a new perspective on strategy, which may translate into improved results.

The report also added that GenAI is expected to play a key role in this growth and is poised to drive the next phase of growth in digital transformation-related deals. (ANI)