- Indian companies have been acquiring foreign firms at a rate never seen before.
- The largest number of acquisitions were in the energy & power sector.
- In the post-pandemic period, Indian IT companies doubled down their expansion efforts.
In the last few months, Indian companies have been acquiring foreign firms at a rate never seen before. As per a report by Thomson Reuters, India’s acquisitions abroad grew 369% to $4.5 billion (nearly Rs 29,937.37 crore) in the January-June period of the ongoing calendar year.
The largest number of acquisitions were in the energy & power sector followed by IT, healthcare, fintech, and edtech. Companies like Reliance Industries led the acquisition cycle power sector and in technology, the emerging networking business giant Tech Mahindra led the charge.
Tech Mahindra acquired US-based, Infostar LLC (Lodestone) and London-based, We Make Websites Ltd (WMW) by Born London Limited for $105 million (Rs 789 Cr.), and £9.4 million (about Rs 97 Cr.) to respectively strengthen its digital portfolio. “The acquisition will strengthen Tech Mahindra’s digital engineering capabilities to effectively utilize data strategy and address machine learning challenges,” said Vivek Agarwal, President – BFSI, HLS & Corporate Development, Tech Mahindra.
In the post-pandemic period, Indian IT companies doubled down their expansion efforts, and this time the focus is not only on organic growth but acquisitions also. Many European IT services firms or the IT division of large companies were acquired by Indian giants. Wipro acquired IT units of German firm Metro AG in a multi-year technology transformation deal with a revenue potential of $1 billion. Wipro had also acquired Belgium-based 4C, one of the largest Salesforce partners in Europe, the Middle East, and Africa (EMEA).
Last year TCS announced two strategic acquisitions centered around strengthening its play in the Banking, Financial Services & Insurance (BFSI) vertical. Before that, it had acquired Postbank Systems AG, the technology services unit of Frankfurt-based Deutsche Bank AG to expand in Germany and strengthen its growth outlook. The technology-based in Germany is expected to help TCS expand its presence in the European nation.
Unlike big tech giants which usually drop the excess baggage of employees by giving them severance packages when an acquisition takes place, the Indian IT giants are ensuring that the employees do not suffer. In addition to acquiring 100 per cent of the shares of Postbank Systems, TCS also announced that the 1,500 employees of Postbank Systems will become part of TCS.
Since the turn of the century, Indian IT companies have carved a separate identity for themselves. After developing and prospering through organic growth for the last few decades, the 2020s have given the fillip to these companies to take a much more aggressive expansion approach in Europe and beyond.
In the edtech sector, Byju’s is on acquiring spree with purchases in America, India, and Europe. The market valuation of the company is estimated to be around 40 billion dollars if it goes for IPO. Byju’s plans to serve the American edtech market from India and the majority of its revenues would be coming from foreign markets in the next few years. Similarly, the fintech players are also eying global expansion but they are more focused on the Southeast Asian market.
The domestic, as well as foreign investors, are bullish over the Indian economy. There is broad consensus that the country is set to witness a decade of high growth period given the reforms implemented in the last few years and the improved global business environment.
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The Indian companies have now access to cheaper global capital and the ability to deliver good growth from the domestic as well as international market. Thus, in order to accelerate the expansion, they are acquiring foreign firms. India is set to become the global leader in sectors like IT services, Green energy, fintech in the coming decade if such a healthy growth rate sustains for even a decade.
