India's software exports race ahead, but listed IT firms fall behind

India's software exports rose 12.7% in FY25, yet listed IT groups saw only 3.8% growth, with market share slipping as unlisted firms and GCCs expand faster

The Reserve Bank of India’s (RBI’s) balance of payments (BoP) data and annual disclosures by the country’s listed information technology (IT) services companies reveal a widening divergence in software exports. While the RBI figures show robust double-digit growth in India’s software  services exports, listed IT groups  have struggled with low single-digit increases in foreign exchange revenues and net sales.

 

According to the RBI, India’s software exports rose 12.7 per cent year on year to $180.6 billion in FY25. By contrast, the combined forex revenues of 64 listed IT services groups -- spanning the BSE500, BSE Midcap, and BSE Small Cap indices -- grew by only 3.8 per cent to $69.6 billion. 

This divergence is not new but has only widened in the post-pandemic period. Over the past five years, India’s software services exports have expanded at a compound annual growth rate (CAGR) of 14.2 per cent, doubling from $93.1 billion in FY20 to $180.6 billion last financial year. Listed IT companies, by comparison, have managed a CAGR of just 7.1 per cent in forex revenues, rising 40 per cent over the same period from $49.5 per cent to $69.6 per cent. 

As a result, the contribution of listed IT groups to overall exports has steadily eroded. Their share of the country’s software services exports fell to a 14-year low of 38.5 per cent in FY25, down from 41.8 per cent in FY20 and a peak of 55 per cent in FY19. 

That marks a reversal of the preceding trend. Between FY05 and FY19, listed IT companies expanded forex revenues at a CAGR of 16.3 per cent, outpacing the 11.7 per cent CAGR of overall software exports. Their share of the national export pie climbed from 31.5 per cent in FY05 to 55 per cent in FY19, with slower growth than overall exports recorded in only three years -- FY09, FY10 and FY13. 

Analysts attribute the recent divergence to faster growth among unlisted IT firms and global capability centres (GCCs) set up by multinationals, alongside differences in how balance of payments (BoP) and company revenues are measured. 

“One factor could be faster growth by small unlisted IT companies and GCCs, many of which are taking business away from large listed IT companies. In recent years, we have also seen a rise in individuals and freelancers offering technology-related services to foreign clients through remote working,” said Madan Sabnavis, chief economist at Bank of Baroda. 

Unlisted IT firms and GCCs have indeed grown quicker than listed players, though not enough to explain the full divergence. The combined forex revenues of 23 leading unlisted IT companies and GCCs rose at a CAGR of 15.9 per cent between FY21 and FY24 -- faster than the 10.9 per cent CAGR recorded by listed peers but still slower than the 17 per cent CAGR for overall exports. Their combined revenues increased from $25.15 billion in FY21 to $39.2 billion in FY24. FY25 data is so far available for only one unlisted group, so analysis is limited to FY24. 

Key unlisted groups and GCCs in the sample include IBM India, Accenture Solutions India, Cognizant Technology Services, Capgemini Technology Services, Amazon Data Services, Goldman Sachs Services, Deloitte Consulting India, HSBC Software Development India, Shell India Markets, Citicorp Services, Bosch Global Services, JPMorgan Services India, and Microsoft India (R&D). 

Others highlight methodological differences as a source of short-term discrepancy. “BoP data is cash-flow based and is captured when there is an actual inflow of foreign currency to an entity in India. In contrast, companies report revenues on an accrual basis when they execute an order, even if payment has not yet been received,” said Dhananjay Sinha, co-head of research and equity strategy at Systematix Institutional Equity.