BETTERING TECH'S BIG BOYS

At a time when big IT services companies are struggling, the agility of mid and small-cap firms is giving them an edge.

- Rukmini Rao

NASSCOM, the technology industry body, has valued the Indian IT industry at around $253.9 billion for FY24 in its recent strategic review findings. Given the macro uncertainty, with nearly 50% fall in overall tech spending world over and a 6% decline in tech contracts, the Indian IT industry is expected to grow a modest 3.8% year-on-year from $244.6 billion in FY23, adding just over $9 billion in incremental revenue.

Large tech services companies that provide annual revenue growth guidance such as Infosys and HCL Tech, expect to end FY24 with 1.5-2% and 5-5.5% growth, respectively. Other large companies are staring at flat growth this fiscal or revenue decline.

In contrast, mid-cap and small-cap companies have a different story to tell. While it wouldn’t be an apple-toapple comparison between both, given the vast revenue gap between the top six and mid-tier firms, the accelerated growth rates of mid-tier firms post Covid has seen price-to-earnings (P/E) ratio increase and reward investors handsomely. With size not dragging them down, sectoral focus and agile operations give them an edge over large IT firms in moving faster as technology becomes a big leveller in the age of artificial intelligence (AI).