Health-tech shines as India’s $283-billion IT sector battles slowing demand

Tier-1 information technology (IT) services providers, mid-caps, engineering research and development (ER&D) firms and health-tech companies reported an average sequential growth of 1.6%, 2.7%, 2.89%, and 4.2%, respectively, during the July-September quarter.

This outperformance stems from health-tech companies adapting more effectively to US regulatory challenges, including tighter spending on medical drugs, and increasing reliance on software platforms for routine patient and administrative workflows, analysts said.

US healthcare drives the boom

Sagility, Indegene, and IKS, listed on the stock exchanges last year. Most of their revenue comes from offering customer and software services to clients in the US healthcare sector.

While Sagility and IKS provide customer support to healthcare and health insurance companies, Indegene offers services and consulting in pharmaceutical marketing, clinical trials, and medical and regulatory affairs.

Sagility, Indegene, and IKS ended the July-September period with respective revenues of $189.4 million, $92.2 million, and $90.2 million, up 5%, 3.7%, and 4% quarter-on-quarter.

This is not a one-off, as health-tech companies have performed better than Indian IT’s big five and auto ER&D firms in the first six months of FY26. Health-tech companies, the big five, and auto ER&D companies reported an average revenue growth of 16%, 1.2%, and 0.26%, respectively during April-September.

“US health tech demand is driven by shift from insourcing to outsourcing, technology adoption for cost optimisation, and adoption of full platform solutions," said ICICI Securities analysts Ruchi Mukhija, Seema Nayak, and Aditi Patil in a note dated 28 November.

To be sure, Sagility, IKS, and Indegene get most of their revenue from the US.

A second brokerage said healthcare spends in the US are expected to increase, which would boost demand for health-tech firms.

Higher healthcare spending in the US will be driven by “a combination of factors, including a worsening elderly-to-working age population-mix, increasing life expectancy, and a surging mix of chronic medical conditions," said Axis Capital analysts Manik Taneja and Rohit Thorat, in a note dated 1 December.

The Axis Capital analysts added that IKS is best-placed among these three Indian health-tech firms to ride the rise in US healthcare spending.

“Of the US’s total healthcare spending, inpatient and outpatient care accounted for 57%, or about $2.8tn. Of this, the addressable market for IKS, consisting of provider-centric technology solutions such as revenue cycle management (RCM), value-based care (VBC), clinical services, coding, and scribing was valued at about $260bn, is expected to see a 7.8% CAGR over CY23-28E," said the Axis Capital analysts.

The Mumbai-based IKS, backed by the family of the late Rakesh Jhunjhunwala, got 98% of its $220 million revenue last year from North America. It provides software platforms to hospitals and physicians for patient engagement, clinical documentation, and revenue cycle management.

The optimistic outlook for the health-tech companies comes as homegrown IT outsourcers are battling low demand, AI uncertainties, and tax flip-flops in the US, their biggest market. Tighter labour mobility has aggravated concerns for clients, as IT services companies will be able to send fewer people to client locations.

In contrast, health-tech companies are better at battling these regulatory hurdles.

“OBBBA (One Big Beautiful Bill Act) has put more pressure on healthcare providers to deliver better care at lower rates. IKS’ platform has become more instrumental in providing healthcare at lower rates. Life sciences companies have figured means of mitigating MFN (most favoured nation)-led pricing decline impact," said the ICICI analysts.

The OBBBA cuts medical funding and drug-spending outlays, leading to reduced health coverage for many citizens. On the other hand, the MFN policy aims to bring US drug prices in line with those in other developed countries. This is expected to hurt pharma companies’ drug revenue, and push them to tighten their sales budgets, which is essentially Indegene’s revenue.

However, Indegene says the revenue slowdown isn’t impacting its business, as large pharma companies are shrinking their internal marketing teams and relying on fewer field agents.

“All these (sales) reps (representatives) which were there. It was very evident that I'm not getting the full ROI. So let me reduce my field force a little bit more. Marketing, a lot of people inside, let me cut down a bit on that. So you do a bit of an internal reaching, which has been happening in the pharma industry recently," said Manish Gupta, chief executive officer (CEO) of Indegene, in a conversation with Mint on 8 October.

The Bengaluru-based Indegene ended last year with $313 million in sales and gets 69% of its revenue from North America.

“Now, to get the work done with these same slightly reduced budgets, you start looking at more effective ways. And that's where a company like us comes in," said Gupta, adding that the company would digitise the sales and marketing operation of the drug.

Sagility's CEO echoed Gupta's views.

“The broader US healthcare landscape continues to face ongoing challenges from rising costs, shrinking margins, and growing regulatory complexity. These factors are accelerating the industry shift towards digital transformation and operational efficiency," said Ramesh Gopalan, managing director and CEO of Sagility, during the company’s post-earnings conference call with analysts on 29 October.

He added that macro uncertainties did not have a material impact on the company’s business.

“In the backdrop of ongoing macroeconomic uncertainties, our client relationships remain very strong. And we continue to engage in deep collaborative discussions with our clients about future possibilities. And in turn, they continue to entrust us with a growing share of the transformational agenda," said Gopalan.

Sagility processes healthcare claims for medical insurance companies and customer support for hospitals in the US. It ended last year with $574 million in revenue.