Now Reading: Indian IT firms acquire captives to boost revenue
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Indian IT firms acquire captives to boost revenue
Indian IT companies are increasingly buying the technology units of global clients to anchor larger, long-term partnerships, reviving an old debate on whether these deals add genuine capabilities or just capacity. The…
Indian IT companies are increasingly buying the technology units of global clients to anchor larger, long-term partnerships, reviving an old debate on whether these deals add genuine capabilities or just capacity. The strategy comes as organic revenue growth slows and AI reshapes tech spending.
TCS is acquiring Porsche's tech subsidiary MHP for $373 million as part of a five-year partnership worth $1.4 billion. Wipro agreed to buy Olam Group's digital arm for $375 million alongside a contract expected to exceed $1 billion. HCLTech is paying $225 million for HPE's Communications Technology Group, and Infosys acquired Danske Bank's IT centre while securing a $454-million contract.
Analysts say captive carve-outs often carry lower valuations than acquisitions of next-generation capabilities in cloud, data, and AI. The trend mirrors earlier acquisitions of captive units from Citigroup, UBS, and Unilever.
Indian Opinion Analysis
The deals highlight a structural shift: Indian IT firms are using acquisitions to lock in long-term revenue at a time when traditional outsourcing contracts face pressure from automation and AI. Unlike the 2008-2009 wave, when captives were bought for cost arbitrage, today's targets often bring specialised talent or intellectual property. The pricing gap between a captive carve-out and a next-generation capability buy means the market is already assigning a higher premium to innovation-focused acquisitions. What matters next is whether these partnerships actually yield the cross-selling and margin improvement that vendors promise, the real measure will be revenue growth from the acquired units over the next two to three fiscal years.
The next signal to watch is the revenue contribution from these acquired units in the quarterly results of TCS, Infosys, Wipro, and HCLTech over the next two fiscal years.
Source: timesofindia.indiatimes.com
This brief was synthesised by AI from the source linked above.
