Indian IT Companies Expect To See Surge In BFSI Deal Wins

Indian IT companies are expected to see increased deal-win momentum in the banking, financial services, and insurance, or BFSI, vertical, driven by renewed tech spending, as uncertainty in western economies stabilises.

The BFSI sector, the largest revenue-generating business vertical for India's $245 billion IT sector, had slowed down tech spending amid macroeconomic concerns. The year-on-year growth of the vertical has consistently dipped in fiscal 2023-2024 for the majority of IT majors. After more than a year of slump, analysts expect the demand environment to improve, resulting in more deals for the sector. 

“The slump has bottomed out, and some deals are picking up, as the sector is generally accepting that possibly the US may not be facing rescission and is having a relatively resilient outlook on the economy. After a prolonged slowdown, clients will also now have to spend on technology; hence, there is pent-up demand,” said Kumar Rakesh, IT and auto analyst at BNP Paribas India.

In May, six deals were announced in the BFSI sector, and most of the deals being signed are for IT modernisation or digital transformation-related work, he said. 

IT major Infosys Ltd., which had signed six deals in the BFSI space, noted in its commentary that it expects financial services to see a better outlook in the next year compared to the past year. 

Further, Wipro Ltd. saw sequential growth in the fourth quarter, in the BFSI, after at least four quarters of being very soft. “What we are seeing is that in the BFSI sector, these are green shoots; we have seen some of the discretionary spend coming to us in the context of consulting,” said Wipro's Chief Executive Officer Srinivas Pallia. The company expects to return to stability led by Capco, its BFSI-focused consulting acquisition, whose sequential revenue grew by 6.6%, and order booking grew by 43.6%. 

“A lot of people have spoken about the recovery that is happening in BFSI in fiscal 2025. I do believe that the vertical overall will recover,” said Mohit Joshi, chief executive of Tech Mahindra Ltd., in the fourth quarter earnings call. "From a TechM perspective, we have certain unique pockets of strength, which is why I think we'll be competent late-movers."

The company will be focusing on core banking, asset and wealth management, and insurance to build out its financial services practice, he said.

“The immediate growth driver will be Generative AI deals, although they will be smaller deals," said Pareekh Jain, chief executive at Pareekh Consulting and EIIRTrend. "The BFSI sector has been at the forefront of AI adoption, and companies are looking to engage more with external service providers as they do not have much internal capability in the area.” Even though the vertical is still far from achieving double-digit growth, it will reach single-digit growth by the second half of the year, he notes. 

IT companies, since the advent of Generative AI, have been actively trying to build their capabilities in the domain.

The industry at large is developing proof of concepts with clients, while deal wins in the domain are gaining ground. Infosys for instance, has introduced Infosys Topaz, an AI-first set of services, solutions and platforms using generative AI technologies. It has also recently launched Infosys Aster - a set of AI-amplified marketing services, solutions and platforms. 

Wipro, which has committed to invest $1 billion in AI, has launched Wipro ai360, an AI-first innovation ecosystem, aimed at integrating AI into every platform, tool and solution.

Tata Consultancy Services Ltd., which has $900 million worth of generative AI and AI projects in the pipeline, has merged its AI and cloud businesses into a new entity called AI.Cloud.

The capital markets, mortgage, and insurance  segments in the sector are pockets of growth companies. Infosys, TCS, and Mphasis Ltd. will be bigger beneficiaries as these companies have higher exposure to capital markets, and Wipro will benefit from its BFSI focused acquisition Capco, noted Sumit Pokharna, research analyst and vice president at Kotak Securities.

However, he also notes that the increase in clients' tech budgets might not benefit service providers entirely as  insourcing to established GCCs could be done, and the focus on cloud usage might draw the spending towards hyperscalers.