The COVID-19 pandemic brought the world to a halt and left uncertainties, pushing the world to a global lockdown. Technology is one thing that came to rescue and proved to be a boon in these challenging times as it made life easy in many ways. The IT sector has witnessed an unprecedented demand for online banking, online shopping, other digital platforms like entertainment, business etc. Digital transformation and migration to cloud became the need of the hour as it made accessing and maintaining data from remote places easier and quicker. Indian IT companies once again established the strength of their business model. Operating under challenging circumstances, IT companies managed to improve margin and free cash flow (DSO improvement) despite extending pricing discounts and credit lines to select few clients, whose business models were completely disrupted. Due to demand and supply side challenges across geographies in the previous quarter, dollar revenue for Indian IT companies in Q1 declined. We expect recovery in Q2, with stronger FY22 led by 1) abated supply side challenges 2) strong exit rate 3) demand recovery with deal wins during the quarter showing no major disruption and pipeline regaining pre-COVID levels. However, the sales cycle continues to be slow. We expect Indian IT companies to grow at 0.5-1.5 percent in FY21E and 7.5-8 percent in FY22E.

(Moneycontrol)