BENGALURU: India’s top IT services exporters—Tata Consultancy Services (TCS), Infosys and Wipro—are likely to strengthen their acquisition business models in line with global trends going forward.
Many overseas firms having put projects at captive global information centres (GICs) on hold due to the pandemic and Indian IT service companies may smell an opportunity here—acquire some of these captive GICs or smaller firms since valuations have dropped considerably.
According to a research note by apex IT industry body Nasscom, though the IT sector globally has shown some resilience, there has been a drop in valuation of many companies, presenting acquisition opportunities.
Globally, the top five tech companies—Facebook, Amazon, Alphabet, Apple and Microsoft—had a cash reserve of $471 billion as of April, 2020.
This could also be used to fund new deals, according to Bain and Co. These tech giants have already embarked on an acquisition spree with special focus on verticals like digital engagement, virtual collaboration, cloud, “as-a-service-offerings”, data analytics, artificial intelligence, security and automation.
For India, leading IT companies are also cash-rich with reserves of over $13 billion as of April, 2020, but no fresh acquisitions were announced during the pandemic. However, management at TCS, Wipro and Infosys indicated that they were hunting for good merger and acquisition (M&A) opportunities while releasing their most recent financial reports.
According to its annual report, Infosys had invested Rs 3,032 crore on acquisitions during FY20. In February, it acquired Simplus, a US-based Salesforce partner, for $250 million. “We have enough of headroom and we’ll have to see if any assets come up which interests us during this period, but we are open to everything at this stage,” Infosys’ CEO Salil Parekh had said.
TCS, meanwhile, has also indicated that it is not shy of M&A opportunities. “Our largest M&A to date was actually executed at the peak of the global financial crisis. We are not shy of M&A and we believe that the best time to execute it is when nobody else is buying,” TCS CEO Rajesh Gopinathan said in the previous earnings call.
Wipro takeovers
Company has recently bought HealthPlan Services (HPS), Appirio, Designit, Cooper, and International TechneGroup.