Infosys, Wipro, HCL and other Indian IT giants on acquisition and investment spree

A new report has tallied how the Indian IT industry has entered into a wave of merger and acquisition (M&A) activity as it diversifies into new investment areas. IT firms that were part of the study include top industry players such as HCL, Infosys, Wipro, among others, who are working to keep up with the rapidly changing global IT environment.

Having come into existence and thrived in an era of outsourcing, Indian IT services firms have found themselves in a battle for relevance in a new age of cloud computing, big data, automation and the Internet of Things (IoT). In a new report titled ‘Tech Investing in Southeast Asia,’ market research firm CB Insights suggests that these companies are strategically navigating the new playing field through a combination of M&A, investment and diversification.

Using a “Business Social Graph,” which is a graphic representation of private investments, CB has tracked the activity of the top IT firms in India by market capitalisation. The firms include: Tata Consultancy Services (TCS), Wipro, Infosys, HCL Technologies, Tech Mahindra, Larsen and Toubro Infotech, Mphasis and Mindtree.

Areas of interest

In order to retain relevance in the changing market, many of these firms have turned to diversification in investment, appearing to act in accordance with global trends. Unsurprisingly for IT firms, the most popular area of investment for the firms was technology services, which includes the thriving cloud-based solutions segment. Not only has the transition to cloud platforms picked up globally, the Indian market itself is due to hit a value of $1.9 billion by 2019, which explains the desire from these companies to tap into that growth. Moreover, Indian firms are set to face stiff international competition in the cloud arena, with Google having recently launched its cloud consulting business in India, and IBM having also expanded into the market through the acquisition of Sanovi technologies. 

Wipro has been particularly active in expanding its cloud profile, having participated in a $5m Series A investment round to US-based cloud specialist firm Drivestream in 2015, and having backed Austria-based software testing company Tricentis in 2017. Meanwhile, HCL focused on the second most popular area for investment, i.e. big data, having acquired large-scale data project company Datawave earlier this year.

IoT and cyber-security come next in terms of investment according to the report, and Wipro appears to be prominent in both these fields. The IT consulting firm gave a round of $4 million to Altizon systems, and two rounds of an undisclosed amount to Axeda, both of which operate in the IoT domain. For cyber-security, the firm participated in two rounds of investment to EmailAge, a firm that verifies the validity of financial transactions through an email-based tool.

Investments

Given the aforementioned figures, it comes as no surprise that Wipro tops the list as the most prolific investor in the study. Since 2012, the firm has closed 18 deals, including those of Wipro Ventures, its $100 million venture capital arm. Investments include their support for Israeli fund TLV Partners and Work-Bench, a New York based firm that focuses on software enterprise.

Bangalore-based IT company Infosys follows rival Wipro, and is also the second most valuable IT company in India by market capitalisation. Major investments for the company include Cloudyn, an Israeli cloud platform company that received $4 million from the firm, and ideaForge Technology, which received a $10.3 million investment. The company also recently invested in and partnered with Tonetag, a startup that uses sound wave technology to conduct financial transactions. Wipro and Infosys were followed distantly by Tech Mahindra and Mphasis in the investor profiles. 

Acquisitions

In terms of acquisitions, Wipro topped the list once more. However, this time it was tied with HCL – the fourth largest IT company in India in terms of market capitalisation – with 5 acquisitions each. Alongside the acquisition of Datawave mentioned above, HCL has also acquired US-based IoT specialists TrygTech; Indian engineering services firm Concept to Silicon Systems; and US-based customer service firm Powerobjects, all in 2015.

Wipro, meanwhile, acquired German IT services company Cellent and US-based business process technology company VITEOS in 2015. Most recently, the firm purchased Brazil’s InfoServer Informatica in 2017 for $8.7 million. Surprisingly, India’s largest IT company by market capitalisation, TCS, featured considerably low in both the investors as well as the acquirers category.