Indian IT firms acquire niche players in ER&D, GenAI to raise revenue

Indian IT companies such as Infosys, Wipro, and HCLTech are increasingly turning to mergers and acquisitions (M&A) to expand into specialized areas like Generative AI (GenAI) and engineering research & development (ER&D) due to limited organic growth opportunities in the global market.

Industry experts anticipate a surge in M&A activities, with notable deals like Cognizant’s acquisition of Belcan for $1.3 billion and Infosys’ purchase of Germany’s In-Tech for $480 million. Despite the significant disparity in deal valuations, these acquisitions are indicative of the growing trend.

HCLTech, too, recently acquired assets of Communications Technology Group from HPE to bolster its telecom capabilities, while Wipro acquired a 60% stake in Aggne Global to strengthen its presence in the insurance sector. Furthermore, Infosys’ acquisition of InSemi, a semiconductor provider based in Bengaluru, aims to enhance its AI and ER&D offerings.

The momentum is not limited to large companies, as midcap firms like Coforge and Happiest Minds Technologies are also actively engaging in acquisitions to enhance their expertise in sectors. For instance, Coforge’s acquisition of Cigniti Technologies is expected to significantly improve its operating margins by FY27.

Similarly, Happiest Minds Technologies acquired Noida-based digital engineering firm PureSoftware Technologies to strengthen its capabilities in BFSI, healthcare, and life sciences, while ITC Infotech’s buyout of Blazeclan Technologies aims to enhance its multi-cloud and hybrid cloud services. Other notable acquisitions include LatentView Analytics’ purchase of Decision Point and Datamatics’ acquisition of Dextara Digital, reflecting the ongoing trend of consolidation and strategic growth in the IT industry through niche sectors. 

Experts, including Phil Fersht of HFS Research, predict a rise in M&A activities in the upcoming year, particularly in sectors that can generate additional revenue. IT firms are expanding their service offerings and profitability by acquiring companies that focus on niche segments. This allows them to promptly tap into specialized skills, knowledge, and technology, while also building robust client relationships. According to K.S. Viswanathan, vice president (Industry Initiative) at Nasscom, these firms are now more prepared to address the growing demand for enhanced AI and product engineering capabilities, ensuring they can meet client needs for more flexibility and accountability in service delivery.

Even smaller M&A deals such as Happiest Minds’ acquisition of US-based digital product engineering company Aureus Tech Systems for $8.5 million to strengthen the former’s engineering capability and IT company Aurionpro Solutions’ acquisition of Mumbai-based AI startup Arya.ai for $16.5 million, aim to enhance Aurionpro’s enterprise fintech offerings, facilitating the adoption of AI in a responsible, accurate, and auditable manner.