ITeS sector’s growth prospects in FY23 augur well for SMEs: CRISIL

The information technology-enabled services (ITeS) sector is set to sustain its growth momentum in the current fiscal year (FY23) — a good augury for small and medium enterprises (SMEs), which account for 20-40 per cent of the sector’s revenue.

In FY22 the ITeS sector’s revenue logged 13-15 per cent growth to about Rs 3.1 trillion, riding on volume recovery across the three key segments — customer relationship management (CRM), knowledge, and transactions. (For the record, SMEs have major exposure to CRM.)

Exports accounted for around 90 per cent of the pie last fiscal, with CRM accounting for 37 per cent. The domestic industry was smaller, accounting for around 10 per cent of revenue, but here CRM contributed around 80 per cent of the pie. Within the segment, non-voice CRM has been gaining traction.

This fiscal year, growth will be aided by the sharpening focus of organisations on digital transformation to enhance customer experience. The integration of emerging technologies across different business verticals to improve customer experience and value delivery support will aid growth in volume.

Added to this, government-backed projects such as Digital India and demand from health care are expected to aid revenue growth of 7-10 per cent year on year in the current fiscal.

CRM players are expected to benefit from increasing demand and adoption of robotic process automation technologies. Knowledge and transaction services, though low in share (around 20 per cent), are also expected to benefit from increasing demand from government-backed projects.

The industry’s margins, though, are expected to contract owing to increasing cost of talent acquisition and retention, as well as facility and travel expenses.