Indian IT Sector Set for Robust Double-Digit EPS Growth Through FY27

The Indian IT sector is projected to see a double-digit EPS Compound Annual Growth Rate (CAGR) of 17.5% from FY24 to FY27, driven by significant deal wins, stabilizing margins, and sustained demand for digital transformation services, according to a Nirmal Bang Equities report.

The Indian IT sector is forecasted to witness a robust double-digit Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) of 17.5% from FY24 to FY27, according to a recent industry report by Nirmal Bang Equities. The report identifies several key growth drivers, including substantial deal wins, stabilizing margins, and a sustained demand for digital transformation services.

In the first quarter of FY25, the sector recorded approximately USD 100.7 billion in total deal wins, marking a 16.6% year-on-year increase despite broader market downturns. This momentum is expected to boost sector performance over the next three years, with expanding opportunities in digital transformation providing further support.

The report also projects that the Nifty IT index will grow at a CAGR of 8.5% over FY24-27, slightly outpacing the market's estimated USD CAGR of around 8%, but falling short of the 11% CAGR achieved between FY21-24, which saw increased discretionary spending. Margins are expected to improve through initiatives like pyramid rationalization, reduced subcontractor expenses, higher utilization rates, and organizational restructuring.

The sector is also anticipated to benefit from CEO changes in six of the 11 companies analyzed, which could bring fresh strategic perspectives and drive performance. Additionally, Generative AI (GenAI) is poised to play a crucial role in the next phase of digital transformation growth.

(With inputs from agencies.)