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

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

Analysts said this outperformance was driven by health technology companies adapting more effectively to U.S. regulatory challenges, including tighter spending on pharmaceuticals and increased reliance on software platforms for routine patient and administrative workflows.

US healthcare fuels boom

Sagility, Indegene and IKS were listed on exchanges last year. Most of its revenue comes from providing customer and software services to clients in the US healthcare industry.

Sagility and IKS provide customer support to healthcare and health insurance companies, while Indegene provides services and consultancy in pharmaceutical marketing, clinical trials, and medical and regulatory affairs.

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

This is not a one-off as healthtech companies have outperformed India’s top five IT and automotive ER&D firms in the first six months of FY26. Health technology companies, big five, and automotive ER&D companies reported average revenue growth of 16%, 1.2%, and 0.26%, respectively, from April to September.

“US healthtech demand is being driven by a shift from insourcing to outsourcing, adoption of technology for cost optimization, and adoption of full platform solutions,” ICICI Securities analysts Ruchi Mukhija, Seema Nayak, and Aditi Patil said in a Nov. 28 note.

Of course, Sagility, IKS and Indegene derive most of their revenue from the United States.

A second brokerage firm said healthcare spending is expected to rise in the U.S., which will increase demand for health technology firms.

Axis Capital analysts Manik Taneja and Rohit Thorat said in a Dec. 1 note that higher healthcare spending in the U.S. will be driven by “a combination of factors such as worsening elderly-working-age population mix, rising life expectancy, and increasing mix of chronic medical conditions.”

Analysts at Axis Capital added that IKS is best positioned among these three Indian healthtech firms to keep up with the rise in US healthcare spending.

“Inpatient and outpatient services accounted for 57 percent of total U.S. healthcare spending, approximately $2.8 trillion. Of this, the addressable market for IKS, which consists of provider-centric technology solutions such as revenue cycle management (RCM), value-based care (VBC), clinical services, coding and authoring, is expected to be worth approximately $260 billion, expected to see a CAGR of 7.8% from CY23-28E.” Axis Capital analysts.

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

The optimistic outlook for health tech companies comes at a time when domestic IT outsourcing providers are struggling with low demand, AI uncertainties and tax volatility in the United States, their biggest market. Tighter workforce mobility has raised concerns for customers, as IT services companies will be able to send fewer people to customers’ locations.

In contrast, healthtech companies are better positioned to combat these regulatory hurdles.

“OBBBA (One Big Beautiful Bill Act) has put more pressure on healthcare providers to deliver better care at lower rates. IKS’s platform has become more effective in providing healthcare at lower rates. Life sciences companies have found ways to mitigate the impact of the MFN (most favored nation)-led pricing slump,” ICICI analysts said. said ICICI analysts.

OBBBA cuts medical funds and pharmaceutical expenses, leading to reduced health insurance for many citizens. On the other hand, the MFN policy aims to bring US drug prices to the same level as other developed countries. This is expected to hurt pharmaceutical companies’ pharmaceutical revenues, pushing them to tighten their sales budgets, which are essentially Indegene’s revenue.

But Indegene says the revenue slowdown hasn’t affected its business as big pharma companies are downsizing their internal marketing teams and relying on fewer field representatives.

“All these (sales) reps (representatives) that were out there. It was very clear that I wasn’t getting the full ROI. So let me reduce my field force a little bit more. Marketing, a lot of people inside, let me reduce that a little bit. So you’re doing some internal outreach, which has been happening in the pharmaceutical industry lately,” said Manish Gupta, chief executive officer (CEO) of Indegene, in a conversation with Mint On October 8th.

Bengaluru-based Indegene finished last year with sales of $313 million, generating 69% of its revenue from North America.

“You now start looking for more effective ways to get the job done with the same slightly reduced budgets. That’s where a company like us comes in,” said Gupta, adding that the company will digitize the sales and marketing operation of the drug.

Sagility’s CEO echoed Gupta’s views.

“The broader U.S. healthcare landscape continues to face ongoing challenges from rising costs, shrinking margins and increasing regulatory complexity. These factors are accelerating the industry’s shift toward digital transformation and operational efficiency,” said Ramesh Gopalan, Sagility’s managing director and CEO, on the company’s post-earnings conference call with analysts on Oct. 29.

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

“In an environment of ongoing macroeconomic uncertainties, our client relationships remain very strong. We continue to engage in deep collaborative discussions with our clients about future possibilities. And in turn, they continue to entrust us with an increasing share of the transformation agenda,” Gopalan said.

Sagility processes healthcare claims for health insurance companies and customer support for hospitals in the United States. It closed last year with a revenue of 574 million dollars.