How and why Indian IT companies like Infosys and Wipro are taking the ‘acquisition route’ to grow

Indian IT companies such as Infosys, Wipro and HCLTech are turning to acquisitions to meet investment needs in new areas such as generational artificial intelligence (GenAI), a report said, adding that this is because opportunities for expansion organic are limited in a cautious global market.

According to a report published in The Economic Times, Phil Fersht, CEO and principal analyst at HFS Research, stated that the IT and BPO services markets are currently stagnant and that “M&A activity will increase over the next 12 months.”

“Most of the new acquisitions will be in areas that bring in additional revenue, with Cognizant acquiring Belcan to expand into aerospace and engineering, Wipro and Rizing to expand SAP consulting, and Accenture and Udacity to expand technical education.” Fersht added.

Indian IT giants are increasing acquisitions for growth
Last year, Infosys acquired three companies: Acquired Danske IT’s GCC division, Danske IT, for $454 million, strengthening its presence in the Middle East; invested $34 million in InSemi Technology Services; and $480 million in German in-tech Holding GmbH to strengthen its research and development (ER&D) capabilities.

Wipro has invested in insurance company Aggne and SDVerse: Wipro has acquired a majority stake in insurance company Aggne for $66 million and a minority stake (27%) in automotive software market SDVerse for $5.85 million.

HCLTech focusing on strengthening its position in the telecommunications sector: India’s third-largest IT player, HCLTech, has acquired two German companies – 100% stake in ASAP Group, an automotive engineering services provider, for $279 million and the Communications Technology Group business unit of Hewlett Packard Enterprise for $225 million.

In February, Tech Mahindra completed acquisition of Orchid Cybertech Services (OCSI), a Filipino BPO company, for $3.27 million.

Meanwhile, US firm Cognizant acquired private equity-backed digital engineering firm Belcan for $1.29 billion (around Rs 10,700 crore) this year. It also bought a third partner of the American software company Service Now. Accenture, the world’s largest industry giant, invested $2.3 billion across 12 acquisitions in Q3FY24.