Indian information technology services companies paid premium valuations for acquisitions focused on artificial intelligence and engineering capabilities in FY26, as firms increased spending on specialised talent, intellectual property and platforms.
Indian IT firms invested about $5.5 billion across 19 acquisitions during the year, according to an analysis by UnearthInsight. Most transactions were aimed at building capabilities rather than increasing scale through revenue or headcount additions.
The shift comes as IT services companies increasingly turn to acquisitions to support growth amid pressure on traditional business models and changing client demand driven by AI adoption.
Hexaware's acquisition strategy has also mirrored the shift towards capability-led deals. "We have always done acquisitions not by scale but for capability, and in the last three years, if you look into it, we did a few acquisitions," Hexaware Chief Financial Officer Vikash Jain told TNIE.
"Acquisitions for us have always been not to gain scale but primarily to gain access to capabilities which we can take across the breadth of our client sets," he added.
The UnearthInsight study found that 12 capability-led transactions worth $4.7 billion commanded higher revenue multiples, while five scale-driven deals accounted for about $400 million. Smaller acquisitions such as HCLTech's purchase of Wobby and Persistent's acquisition of Aepona recorded some of the highest valuation multiples.
"Capability acquisitions replaced scale-driven M&A," the report said, adding that companies increasingly targeted specialised capabilities, platforms and talent instead of pursuing revenue expansion.
Coforge led in terms of deal value with acquisitions worth about $2.35 billion. The bulk of the value came from its acquisition of US-based engineering and AI services company Encora.
Further, Infosys and HCLTech completed the highest number of transactions during the year.
North America accounted for 68% of acquisitions, underscoring the importance of market access and proximity to clients. Europe represented 21% of deals, while Asia-Pacific accounted for the remaining 11%, according to the UnearthInsight report.
The focus on AI capabilities has continued into FY27. Earlier this week, HCLTech agreed to acquire a 10.5% stake in generative AI startup Sarvam AI for about $150.7 million, valuing the company at $1.5 billion, as it stepped up investments in next-generation AI models.
The investment also signals a shift in deal-making, with companies increasingly taking strategic stakes in AI firms to gain access to technology and capabilities rather than relying only on full acquisitions.
The appetite for AI assets is not limited to Indian technology companies. SpaceX this week agreed to acquire AI coding startup Cursor in a $60 billion all-stock deal, one of the largest acquisitions involving a venture-backed software company, highlighting the valuations investors and companies are placing on AI capabilities.
According to UnearthInsight, deal activity is expected to remain strong in FY27, with Indian IT companies likely to complete around 22 acquisitions worth about $6 billion, driven by demand for AI, data, engineering and digital transformation capabilities.