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Indian IT firms chase inorganic growth through acquisition route

by databiztimes.com
16 May 2024
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Indian IT firms chase inorganic growth through acquisition route

Credit: Murrstock/Adobe Stock

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-Around 10 M&A deals have been announced since last year with Infosys, HCL Tech, Coforge, Happiest Minds, ITC Infotech taking the lead

DBT Bureau

Bengaluru, 16 May

Indian IT firms are becoming aggressive in the M&A (merger & acquisition) space with acquisitions of many companies in recent quarters.

Experts are of the opinion that IT companies are trying to push up revenue growth rates through the inorganic route as organic growth comes down for the whole industry. They also said that most acquisitions are happening in the engineering services, digital, and cloud areas as these domains remain bright spots despite the overall slowdown.

Interestingly, many large firms and several mid-tier firms have announced acquisitions in the past quarters. For instance, Infosys said it would acquire in-tech, an engineering R&D services provider focused on the German automotive industry, for around $480 million. The Bengaluru-headquartered firm announced the acquisition of InSemi, a provider of semiconductor design and embedded services, for around Rs 280 crore (about $34 million).

Among large firms, HCL Tech acquired German automotive engineering services company, ASAP Group for $279 million last year.

Not only large IT firms, but mid-tier IT services companies are also investing heavily in acquiring companies that will accelerate their revenue growth in FY25.

This month, Coforge has announced a big-ticket acquisition in order to drive its next phase of growth. The company will acquire a majority stake in Cigniti Technologies for around $220 million, making it the biggest M&A deal so far.

Coforge has said that post this acquisition, its revenue is likely to grow to $2 billion by FY27 along with an improvement of margin by 150-200 basis points by this period.

“The acquisition will create three new scaled-up verticals – Retail, Technology and Healthcare. It will help Coforge realize its objective of scaling up its presence across South-West, Mid-West, and Western US markets. It will also help Coforge address the significant opportunities that the proliferation of AI is creating for specialized Assurance Services,” the company has said in an exchange filing.

Happiest Minds is another IT firm that has done series of acquisitions in recent quarters. The company last month said it would acquire PureSoftware Technologies for Rs 779 crore (around $98 million). Last week, it signed definitive agreements to acquire 100% stake in US-based digital product engineering company Aureus Tech Systems for $8.5 million, or around Rs 71 crore, in cash consideration. Macmillan Learning India is another firm that Happiest Minds announced to acquire last month.

Another mid-tier IT services firm, ITC Infotech announced the acquisition of cloud services firm, Blazeclan for Rs 485 crore (about $60 million) in April.

Experts opine that macroeconomic uncertainty, tepid demand in North America, and robust cash reserve are the driving factors for such a flurry of acquisitions in recent quarters. Such a trend is likely to accelerate in the coming months, they added.

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