INSUBCONTINENT EXCLUSIVE:
The report said that the companies will need to focus on pushing pricing as all the operating metric are at or near peak.2 min read Last
Updated : Sep 05 2024 | 11:06 PM IST
The Indian IT sector has reported a 6 per cent year-on-year (Y-o-Y) increase in revenue per head
(RPH) in the first quarter of financial year 2025 (Q1FY25), according to a report by HSBC Securities and Capital Market research.
While
this may seem like a positive trend, a closer examination reveals that the increase in RPH is largely driven by factors such as higher
utilisation, pass-through revenues, and sub-contracting ratios, rather than underlying pricing trends.
The report points out that Infosys
led the large-tier companies with a 9 per cent increase in RPH, while mid-tier companies like Persistent Systems (PSYS) with 14% and KPIT,
around 2-3 per cent for Infosys and nearly flat for the sector as a whole
The increase in RPH is largely driven by internal efficiency measures, multi-year mega deal wins, and onsite-heavy projects with
parameter in the industry as it is considered to be a proxy for pricing trend.
The report also added that the RPH has come at the price of
For instance, Persistent Systems RPH has gone up due to ramp-up in large deal wins, but it is also margin dilutive
companies will need to focus on pushing pricing as all the operating metric are at or near peak.
With operating metrics at or near peak
across companies; with this backdrop, we expect companies to push harder for COLA (cost of living adjustment) increases
We expect this should lead to better billing rates, at least for onsite business
Increase in GenAI penetration in the custom application development business should be margin-accretive as well, though that would probably
