Day: March 26, 2025

India’s software-as-a-service (SaaS) industry is expected to touch $100 billion by 2035, from $20 billion currently, helped by artificial intelligence-led discontinuities in automation, cost-effective software development, expanding small and medium business (SMB) adoption, and deepening government digital initiatives, according to a report by SaasBoomi. 

Growing enterprise artificial intelligence and cloud adoption will be a major growth lever, expected to contribute $35 billion in market expansion. Companies across banking, financial services and insurance (BFSI), healthcare, and manufacturing are investing in AI-powered automation and cloud-based efficiencies, pushing software demand across sectors. 

Digital-native businesses will increase their software spend from $4.6 billion in 2025 to $26 billion by 2035, as they build deeper digital capabilities. 

“For Indian SaaS firms, success will depend on their ability to build localised solutions that scale globally, leveraging AI and vertical SaaS to tackle challenges that are uniquely Indian. The next decade will be defined by the ability of Indian companies to address these gaps,” said Avinash Raghava, founding volunteer and chief executive officer, SaaSBoomi. 

The report, published together with 1Lattice, added that SMBs represent another major driver of growth, as vertical SaaS solutions are set to unlock a $13 billion opportunity.

While global SaaS players have traditionally dominated the horizontal software market, India’s growing start-up ecosystem is building industry-specific solutions that cater to local regulatory and business requirements. 

Another area of growth is the cybersecurity market, expected to surge to $10 billion from just $1.6 billion currently. With India’s digital economy expanding rapidly, companies are investing heavily in compliance-driven security solutions, data protection frameworks, and automation tools to meet regulatory requirements such as the Digital Personal Data Protection (DPDP) Act 2023 and the Reserve Bank of India’s fintech security norms. 

Amar Choudhary, chief executive officer and co-founder, 1Lattice, said, “The future of SaaS will belong to companies that master efficiency without sacrificing ambition. Investors today are looking for capital-efficient businesses with strong fundamentals.”

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India’s IndusInd Bank garnered $2 billion in higher-cost bulk deposits in March, its biggest monthly haul in at least two years, as the lender shored up its funding base after disclosing accounting lapses.

The country’s fifth-largest private sector bank flagged earlier in the month a $175 million hole in its balance sheet, citing accounting discrepancies in its derivatives portfolio.

The discrepancies have led to concerns over governance at the bank and the appointment of Grant Thornton to conduct a forensic review into the accounting lapses. The bank’s shares are down nearly 27 per cent since the lender disclosed the matter.

Publicly available data from India’s clearing house showed that IndusInd Bank raised Rs 16,550 crore ($1.93 billion) in March through the sale of certificates of deposits (CDs) maturing in three months to one year, with about 85 per cent of that raised after the lapses were disclosed.

It paid 7.90 per cent on its one-year CDs this month, 20 basis points higher than what it had paid for similar deposits in February, the data showed.

“By issuing CDs, the bank may want to shore up its overall deposit base and maintain higher liquidity to counter uncertainty on deposit withdrawals,” Karthik Srinivasan, senior vice president & group head at rating agency ICRA, said.

“It is also a confidence building exercise to ensure that the bank’s liquidity remains strong.”

An IndusInd spokesperson said the bank “evaluates various sources of funds depending on its asset and liability requirements” and that it has a “healthy liquidity position” with a focus on retail deposit mobilisation.

The Reserve Bank of India (RBI), the country’s central bank, said this month IndusInd Bank was well capitalised and its financial position remained “satisfactory”.

Less Preferred Option

For lenders in India, bulk deposits – those that are more than Rs 3 crore – are generally less preferable to retail deposits as they cost around 20-150 basis points more.

But IndusInd Bank raised through bulk deposits in March nearly 3.5 times what it raised in the preceding month, marking its highest haul since at least April 2023, the clearing house data showed.

The on-month jump in such deposits raised by IndusInd Bank is also way above the 40 per cent average increase for the banking industry.

RBI asked some state-run and private-sector banks to subscribe to IndusInd Bank’s bulk deposit CDs, two sources from banks that have subscribed to these instruments said.

The central bank did not immediately reply to a Reuters email seeking comment.

The sources requested anonymity as they are not authorised to speak to media.

IndusInd Bank had an overall deposit base of Rs 4.09 trillion as of December 2024 of which retail deposits accounted for 46 per cent, according to its latest available data.

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Goldman Sachs expects the Indian stock markets to remain volatile in the near-term even as the overall valuations have come off meaningfully from their peak levels seen in September 2024. As a strategy, they remain ‘Marketweight’ on India within the emerging markets (EM) context, and recommend focusing on quality growth and earnings visibility. 

“While our strategy team also believes that the worst is likely behind us in terms of economic growth and earnings trajectory, and prices have corrected meaningfully, they see higher market volatility in the near term given still elevated domestic positioning in small/mid-caps and ongoing global uncertainty from tariffs,” wrote analysts at Goldman Sachs in a recent report.

Amidst this backdrop, Goldman Sachs has highlighted ten stocks that offer 23 per cent upside (on average) over the next 12 months and includes HDFC Bank, AU Small Finance, Mahindra & Mahindra (M&M), MMYT, Indigo, Adani Ports & SEZ, Power Grid, Apollo Hospitals, Titan and GCPL.  

“These names have strong tailwinds within their respective sectors and have the potential to deliver strong returns over the next 12 months due to either positive catalysts or healthy EPS growth momentum. As per our estimates, these companies are expected to deliver average earnings growth of 25 per cent and return on equity (ROE) of 24 per cent on average over 25-27E,” the note said.

Goldman Sachs top India bets for FY26

The Nifty 50 has corrected 10 per cent from its peak in September 2024, Goldman Sachs said, driven by cuts in earnings per share (EPS) growth following a slower macro as well as a sharp correction in the valuation multiples across sectors. Across the market, FY26 EPS expectations, the note said, have been cut by an average of 7 per cent. 

Growth slowdown 

On the economic front, Goldman Sachs believes that the growth slowdown is cyclical rather than structural, and largely reflects policy tightness — the lagged effects of credit regulation in late 2023, cautious monetary policy and (until recently) tight liquidity amidst FX outflows, and most importantly fiscal tightening. 

“Some recent policy easing measures (income tax relief in the union budget and policy rate cuts by the RBI) may help revive real GDP growth later in the year, with our economists expecting 6.4% growth in the second half of calendar year 2025 (H2-CY25). The risks to these estimates are largely related to the impact of potential reciprocal US tariffs on India,” analysts at Goldman Sachs said.

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