Private Equity Firms Show Increasing Interest in $400bn Indian IT Services Industry

Data shows that the number of private equity (PE) firms holding stakes in Indian IT services companies has doubled between 2019 and 2022, indicating a growing interest in the sector. These firms view IT services companies as safe investments due to their proven business models and profitability.

Institutional shareholding in listed IT services companies has also increased, with large-cap firms increasing by 9% and mid-cap and small-cap firms increasing by 16-18% in the last year. This trend is being fueled by a succession of acquisitions spearheaded by private equity firms such as ChrysCapital and Carlyle.

According to Shobhit Jain, Managing Director and Co-Head of Enterprise Technology and Services at Avendus Capital, M&A activity and growth capital in IT enterprises that have demonstrated both scale and profitable expansion has increased.

ChrysCapital’s acquisition of US-based Xoriant and Carlyle’s acquisition of a 28% stake in Quest Global are two recent deals in the Indian IT services sector. Proximus Group, located in Belgium, is also acquiring a 58% share in Route Mobile.

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In other news, in the first half of 2023, private equity (PE) and venture capital (VC) funds invested $21 billion in Indian enterprises and startups, indicating a solid recovery of risk capital inflow. While PE investments increased by 10% in the second half of 2022, VC investments fell by 25%. Notably, investments in PhonePe and Lenskart accounted for 30% of total VC funding from January to June.

A report predicts that fintech companies in India will contribute to creating an overall value of $400 billion by 2030.

Source: Clayton County Register

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