AI drives nearly half of Indian IT M&A deals in two fiscals

Nearly half of the mergers and acquisitions by Indian IT companies in the past two financial years were driven by the need to acquire AI and allied capabilities, according to a Crisil Ratings report. The report assessed around 90 M&A deals and found that AI has become a strategic acquisition trigger, moving from experimentation to a boardroom priority. Crisil said acquisitions are used to compress capability-building cycles, with over 70 per cent of targets based in the US and Europe.

Separately, rediff.com reports that Indian IT firms are seeing an uptick in outcome-based pricing contracts, driven by AI. TCS said it sees a shift toward outcome-based commitments, especially in agentic GBS. Cognizant signs 45 per cent of its BPO contracts under this model. Infosys, however, has not yet seen a significant increase in such deals despite stronger client interest. Outcome-based pricing charges clients for actual usage or results, contrasting with traditional time-and-material models.

Crisil noted that the acquisitions have not materially weakened balance sheets, as most were funded through internal accruals or share swaps. Key transactions include Coforge's $2.35 billion acquisition of Encora and TCS's $700 million acquisition of Coastal Cloud. Crisil said the eventual impact depends on successful integration, talent retention, and monetisation of AI capabilities.