Nov. 1, 2009 (The Hindu Business Line) --
is attractive.
Shamik Paul
But in the modern world fraught with uncertainty, every winter is not necessarily followed by spring, and silver linings to dark clouds are not as bright as one would expect them to be. A case in point would be the current economic downturn that has been termed as the darkest winter in recent times. While some are optimistic that a recovery is in sight, others are sceptical about the possibility of a quick turnaround.
The Indian IT industry that felt the impact of the crisis was also caught in this prolonged twilight zone, which lies between downturn and recovery. As a result, mergers and acquisitions in the sector had come to a near standstill.
Silence broken
In the last one month or so, the silence has been broken and a few deals have been inked, but industry experts believe this is not the beginning of big ticket M&A activity in the Indian IT industry. The sentiment has definitely improved from what it was six months ago, and companies are looking at acquisitions more seriously now, but are still shy of large deals, experts say. For some time, small to mid-sized deals will dominate the space, they feel.
The US-headquartered Cognizant Technology Solutions (NASDAQ:CTSH) , which delivers a bulk of its services from India, acquired the Hyderabad-based captive unit of United Bank of Switzerland (UBS) in a $75-million deal.
The Bangalore-based mid-sized firm MindTree Ltd, which is eyeing a billion dollars in revenue by 2014, acquired the captive unit of CDMA phone maker Kyocera to strengthen its R&D services team. The Chennai-based Polaris Ltd, another mid-sized firm, announced the buy-out of smaller rival Lasersoft.
The global IT services arena has started seeing consolidation with hardware vendors showing appetite for the services companies. Personal Computer maker Dell Inc (NASDAQ:DELL) acquired Perot Systems (NYSE:PER) in a $3.9-billion deal to improve its services capability, while documentation and imaging firm Xerox (NYSE:XRX) Inc bought out ACS in a $5.5-billion deal.
Big-ticket purchases unlikely
However, such deals are unlikely to prompt the large Indian services vendors to make big-ticket purchases immediately, industry experts predict.
“These deals may not change the way the large Indian vendors think,” says Manohar Atreya, Head, Technology Investment Banking, o3 Capital.
