Tale of contrasts in tech growth, Nasscom count

On Monday, Nasscom said the IT industry should end with $283 billion in revenue in FY25, which would mean a 5.1% growth from the year-ago period. Surprisingly, for the first time in a quarter of a century, it revised its FY24 revenue estimate from the $253.9 billion set in September to $268.8 billion. Nasscom also restated numbers for the people employed in the sector, from 5.43 million to 5.67 million.

These revised numbers imply that in March 2024, the IT industry grew from $244.6 billion a year earlier to $268.8 billion– a steep 9.9% growth — and added 300,000 people. It also said in FY25, the industry would 126,000 people to its 5.8 million-headcount.

Put simply, Nasscom estimates that India’s IT industry services will grow slower in the current fiscal year than last year.

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This is where Nasscom’s revised numbers are out of sync with the growth of the country’s largest IT services firms.

The IT services segment is the largest of the $254 billion IT industry, accounting for half, or $128.4 billion. Engineering, Research and Design, and Software products firms were the second largest, accounting for 23%, or $58.5 billion. BPO firms brought $48.9 billion, and computer hardware $18.2 billion.

The Big Five

The IT industry’s Big Five — Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, Wipro Ltd, and Tech Mahindra Ltd — together had $78.03 billion in revenue last year, or about 30% of Nasscom’s revised numbers of $268.8 billion.

TCS, which does not give guidance, reported a 4.6% dollar revenue growth in April-December. The country’s largest IT services firm grew at 4.1% last year. Infosys expects an at-best 5% growth in constant currency terms this fiscal year compared to a 1.4% growth last year.

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Constant currency does not take currency fluctuations into account.

HCLTech expects 5% in constant currency terms this fiscal, similar to what it did last year. Wipro expects its full-year revenue to decline by 1%, which is better than last year’s decline of 2.2%. Finally, Tech Mahindra’s revenue in the April-December period has slipped 0.3% compared to the year-ago period. In the April-March 2024, Tech Mahindra’s full-year revenue declined 5%.

In short, in FY25, the country’s five largest IT services firms are all doing better than last year.

Again, on the employee front too, the Big Five have done better, adding 17,188 employees in the first nine months of this fiscal year, compared to their headcount shrinking by 57,735 last year.

GCC business

“When Nasscom gives out its numbers in February, it can confidently say the growth at the IT services and BPO firms. The only number that comes with a lag is its estimates from GCCs,” said a Mumbai-based executive at an IT service firm.

Nasscom attributed the restatement in FY24 numbers to higher business from Global Capability Centres (GCCs).

“To track the GCC industry revenues, every five years, Nasscom conducts a detailed industry analysis on the sector. Accordingly, based on its 2024 GCC landscape report, Nasscom had restated the GCC industry revenues and headcount in September 2024. The Strategic Review industry numbers factor this restatement. Based on the analysis, the industry revenues for FY2024 with revenues of $268.8 billion and 5.67 million employees,” Nasscom said in a press release.

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According to Nasscom estimates in a report dated 7 September 2024, over 1,700 GCCs or captive units of foreign companies accounted for $64.5 billion in revenue.

On Monday, Nasscom did not individually describe the growth of the IT services industry, BPO and Software services firms, and GCCs.

An email sent to Nasscom seeking comment went unanswered.

“Assuming the GCC industry is $64.5 billion. Reading the Nasscom press release suggests that GCC accounted for the bulk of this $15 billion in revised numbers. Even assuming GCC accounted for $10-$11 billion of this $15 billion change, the question arises: Did the GCCs, at $64.5 billion in revenue, see an uptick of 20%?” wondered an executive at a Pune-based IT service firm.

“This looks very unlikely. Nasscom needs to explain its methodology for this number-crunching exercise,” the executive said.