Indian IT firms go aggressive in mergers and acquisitions
Published On: Tuesday, July 28, 2020 | By: Team KnowMyStock
The top four Indian IT firms have a cash reserve of close to $15 billion. Market leader Tata Consultancy Services has around $5.9 billion, while it is around $3.6 billion for Infosys. Wipro is sitting on close to $3.4 billion, while HCL Technologies has $1.75 billion. As growth slows owing to the pandemic, these cash-rich tier-I IT services companies are pursuing organic growth, including acquisition, indicating a change in capital allocation policies. Apart from mergers and acquisitions (M&As), even large rebadging deals (outsourcing work while reducing employee strength) and buying out captives of global firms are part of these initiatives. This is being done to drive revenue growth at a time most firms posted a revenue decline in sequential terms in Q1 of FY21, which is traditionally considered to be a strong quarter for IT services companies.
“Most demand is coming from the cloud space, which the Indian IT players have to build up. Secondly, revenue growth is a challenge, which can be supplemented through acquisition. Both are happening, which require allocating capital,” said V Balakrishnan, chairman of Exfinity Venture Partners and former chief financial officer and board member at Infosys.
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