Mid Tiered Indian IT Companies May Experience Consolidation – India Changed IT Environment

01:15:00
Last one decade, Indian IT companies showed phenomenal growth and returns for their esteemed investor. The Top 25 IT companies captured most of the generated revenue. In the process of opportunistic pick by Big Daddy of Indian IT Industries, many IT players decided to create their niche segment and worked on offer innovative service solutioning offering instead of large player strategy of service solutioning offering.
Most part of the last decade was dominated by TCS, Infosys, Wipro and Satyam but last three years turned everything for toss. Strong IT player Cognizant, Tech Mahindra, HCL Technologies entered into big league through flurry of acquisition. Satyam financial scam dented Indian IT Image.
During all this certain companies flashed on main arena such as MindTree, Oracle Financial, iGate, Patni Computer which got acquired , Hexaware, Geometric. Rolta, MPhasis, Polaris Financial Technology, Nucleus, RS Systems, Impetus Technologies and many more.
Post 2008 financial meltdown, in my point of view; only few Indian IT companies managed to get back the same growth rate which they achieved before the start of financial crisis..
Infosys slipped to third position on revenue term whereas cognizant captured 2nd largest IT firm in revenue term. It is important to note that Wipro struggling whereas TechM is on acquisition mode. The struggle at Infosys with their Strategy 3.0, Wipro Restructuring, Cognizant ambitions, HCL Technologies continuous contract renewal bid over competitors changed Indian IT industry dynamics. The recent economic downturn in India, Natural calamity in US and severe downturn in Europe impacted Indian Mid-Tier IT companies as mentioned above. Most of the Mid-Tier listed IT companies’ market valuation ranges from $150 to $600 Mn with attractive EBITA, Cash position, Strong Cliental and Long term managed services contract. The recent on-going talks around Polaris Financial Technologies only confirm the same. Net Positive Cash pile of more than $85 (Constant Currency – 1$-55INR), $ 400 Mn Revenue, EBITA around $85 Mn w.r.t just concluded yearly revenue. Recent, blind selling in equity post Currency concern also push Polaris share price from 140 INR to 110 INR level in 5 trading days. For value investors looking to ride on acquisition premium may consider dipping into the same. I am sure, M&A in Indian IT sector is yet to start but its round the corner.

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