Nearly half of the mergers and acquisitions (M&As) by India’s top information technology (IT) companies over the past two fiscals involved artificial intelligence (AI) and allied technologies, as companies sought to acquire capabilities in AI, cloud, data engineering and domain expertise, according to a report by Crisil Ratings.
Crisil’s analysis of acquisition rationales across 26 Indian IT companies found that AI has emerged as the defining theme of inorganic investments, replacing the focus on digital capabilities such as cloud computing, process automation and analytics that dominated acquisitions between FY19 and FY24.
“AI has become a strategic acquisition trigger for Indian IT companies. 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.
In a rapidly evolving technology cycle, acquisitions can shorten capability build-out timelines from years to months and help companies remain competitive as enterprise AI adoption gathers pace,” said Aditya Jhaver, director, Crisil Ratings.
Of around 90 M&A deals assessed, most acquisitions over the past two fiscals were outbound, with more than 70% of targets based in the US and Europe. These markets offer deeper pools of AI talent, proprietary platforms and sector-specific intellectual property, the rating agency said.
The acquisitions targeted capabilities spanning generative AI, agentic AI, cloud-native platforms, digital engineering and industry-specific automation, besides data engineering, engineering, research and development (ER&D) and enterprise platforms.
Crisil said the inorganic push had not materially weakened balance sheets, with most transactions funded through internal accruals, cash reserves or share swaps and limited reliance on debt.
“So far, deal discipline has played a vital role in preventing credit profile slippages. Most acquisitions have been modest relative to the acquirers’ net worth and funded largely without material debt. Therefore, while AI-led M&A should strengthen business positioning, we do not expect it to materially impair credit profiles, provided companies integrate assets effectively and avoid stretching balance sheets in pursuit of transformative bets,” Joanne Gonsalves, associate director, Crisil Ratings, added.