Synopsis
While the capital deployment is aggressive, Karan Uppal, vice-president of Phillip Capital, highlighted that from a revenue contribution perspective, these acquisitions are still not large enough. The nearly $300 billion Indian tech services industry is expected to see a revenue deflation of 2-4% in the next two years, according to industry watchers, as enterprises accelerate AI adoption.The Bengaluru-headquartered company’s purchase follows similar large buyouts by its Indian rivals. Tata Consultancy Services agreed to acquire US-based Coastal Cloud for $700 million, while Coforge signed a definitive agreement to take over Encora for $2.35 billion, both in December. In August last year, Wipro bought Harman DTS for $375 million.
“The acquisitions show the kind of aggression from management in terms of M&A, perhaps similar to Accenture but on a smaller base,” said Karan Uppal, vice-president and lead analyst for IT services at Phillip Capital.
“Industry growth is weak currently, as AI-led compression weighs on them. So, companies are trying to deploy cash wherever they can, to fill wherever there are white spaces,” he added.
The nearly $300 billion Indian tech services industry is expected to see a revenue deflation of 2-4% in the next two years, according to industry watchers, as enterprises accelerate AI adoption.
The larger of Infosys’ transactions, for Optimum, is focused on the healthcare/life sciences sector. The Indian company had posted 5.4% year-on-year fall revenue in the healthcare/life sciences virtual, in constant currency terms in Q3 of FY26
TCS’ purchase of Coastal Cloud and ListEngage in October last year were centred on catching up on their Salesforce consulting capabilities. Wipro and Coforge’s deals were aimed at expanding digital engineering services.
“Domain-specific capabilities are one of the biggest value pools in technology services today and firms that don't build or buy them will find themselves commoditised,” said Praveen Bhadada, chief executive of consulting firm Neovay Global.
Analysts also pointed to the attractive valuations at which the acquisitions are being made, making them valuable additions to the company. Infosys’ Optimum deal is valued at a price-to-sales ratio of 1.5x, while Stratus is around 2.0x. Wipro bought Harman DTS at 1.2x.
The TCS and Coforge deals were at comparatively higher valuations of 3.7x and 4x, respectively.
“These are attractive multiples, but that window will not stay open for long. As AI continues to inflate the perceived value of specialised platforms and proprietary data assets, acquisition multiples in these verticals will climb meaningfully,” Bhadada said. The firms waiting on the sidelines will essentially end up paying a premium with every passing quarter, he added.
While the capital deployment is aggressive, Uppal highlighted that from a revenue contribution perspective, these acquisitions are still not large enough.
“From a revenue contribution perspective, the acquisitions combined will add just about 1.2% to Infosys revenue,” he said. Coastal Cloud will add about 0.5% to TCS’ revenue in FY27, while Harman will add 2.1% to Wipro’s revenue.
In a note last week, brokerage firm UBS said the Encora acquisition will be dilutive to Coforge’s earnings by about 20%.
These figures further signal the underlying weak revenue growth of the tech services industry, analysts said.
