Indian IT drives PE interest despite global headwinds
private equity firms holding stake in Indian IT services companies has doubled between 2019 and 2022 to more than 50 now, data by Avendus Capital show.
Institutional shareholding in IT services companies listed in India has also increased — by 9% for large-cap players, and 16-18% for mid-cap and small-cap firms over the last 12 months. There has also been a spate of acquisitions led by PE firms such as ChrysCapital and Carlyle.
With Indian IT services becoming an increasingly attractive investment area for a spectrum of investors including PE firms, many more M&A deals are in the works, said experts.
This even as the startup ecosystem in the country has somewhat soured.
IT firms are seeing interest as they are considered “safe”, having demonstrated a tried-and-tested business model and profitable growth over many years.
“We are observing an uptick in activity in both M&A and growth funding considering the companies are able to demonstrate both scale and profitable growth,” Shobhit Jain, managing director and co-head, enterprise technology and services Investment banking, Avendus Capital told ET.Earlier this year, homegrown PE firm ChrysCapital announced the acquisition of US-based Xoriant which further acquired Thoucentric of Bengaluru. Other major deals in recent weeks were led by Carlyle, which acquired a 28% stake valued at around $500 million in Quest Global.
Belgium-based Proximus group is acquiring a 58% stake in communications service provider Route Mobile for about Rs 5,922 crore.
“In 2019, around 25 PE funds were invested in the IT services space; this number has grown to 50+ now,” said Jain. Multiple new funds have emerged in the US and India which are looking at the Indian IT space closely, he said.
Akshat
