A Crisil Ratings analysis of roughly 90 deals across India's top 26 IT companies has found that nearly half of the mergers and acquisitions undertaken over the past two financial years were driven by the need to acquire artificial intelligence and allied capabilities, as companies increasingly turn to acquisitions to accelerate their transition towards AI-led services.
Between fiscals 2019 and 2024, acquisitions were primarily aimed at strengthening digital capabilities such as cloud computing, process automation and analytics, or expanding geographical reach. Over the past two fiscals, however, AI and related capabilities such as data engineering, digital engineering, ER&D and enterprise platforms have dominated deal rationales.
Crisil Ratings said that AI has become the acquisition thesis as clients move from pilots to enterprise-scale deployment and service providers seek to rapidly acquire AI, cloud, data engineering and domain capabilities.
"The objective is not merely to add scale but also to enhance relevance through specialist talent, domain-ready platforms, marquee clients and sharper go-to-market capabilities," said Aditya Jhaver, Director, Crisil Ratings, adding that acquisitions can shorten capability build-out timelines from years to months.
Among the key AI-related transactions cited by Crisil Ratings were Coforge's USD 2.35 billion acquisition of Encora, TCS' USD 700 million acquisition of Coastal Cloud, Infosys' USD 465 million acquisition of Optimum Healthcare IT and Wipro's USD 375 million acquisition of Harman DTS.
Most acquisitions over the past two fiscals were outbound, with more than 70% of targets based in the United States and Europe. These markets offer deeper pools of AI talent, proprietary platforms and sector-specific intellectual property, making them attractive hunting grounds for Indian IT companies looking to acquire globally relevant capabilities.
Softer discretionary technology spending, pressure on traditional services growth and rising demand for AI-led transformation are prompting IT companies to sharpen their portfolios, deepen vertical expertise and acquire differentiated platforms or specialist talent in priority markets.
Despite the rise in acquisitions, Crisil Ratings said the transactions have so far not materially weakened the balance sheets of acquiring companies, as most have been funded through internal accruals, cash reserves or share swaps with limited reliance on debt.
