Generating alpha from India Tech Inc
As a sector that has upended practically every other industry by disrupting as well as driving efficiencies through innovation in process and product management, technology has been the bulwark of business activity.
Not surprisingly, it has been an evergreen sector in attracting private capital. While the current top-tier Indian software services giants went public early, BPO firms went through a process of getting VC and PE backers and then hitting the public market. Over a period of time the traditional technology sector was seen as too cash-rich to require capital and matured to generate alpha for alternative investors.
Tech startups made up for the missing opportunity over the last decade and half. Legacy small and mid-sized IT firms, too, kept the momentum going in terms of consolidating their business and seeing intermittent PE interest. Larger legacy software firms have also been trying to expand their foothold overseas with opportunistic buys in the small-to-medium ticket sizes.
However, things seem to be moving to the next level as a clutch of buyouts in the field in the recent past shows how financial and strategic investors see an opportunity of not just scaling up mid-sized software and engineering services companies swiftly but also squeezing more efficiencies in India Tech Inc at large.
Deals involving Mphasis, Mindtree, NIIT Technologies, Hexaware, Majesco, Accelya and GlobalLogic all attest to this undercurrent. At the same time, emergence of firms like Happiest Minds, which went public earlier this year, shows there is still immense scope of creating new businesses with a specialised bent even in a crowded sector.
Overall, technology as a sector has accounted for nearly half of all private investments by volume and attracted capital worth around $51 billion, or over a fifth of the total private capital flow in India over the last decade, according to VCCEdge. In the same period, Indian technology companies comprised a fifth of the 9,400 M&A transactions even though at $39 billion those deals were just about 10% of the value of M&As across sectors.
To gauge how tech companies are firming up their strategies for the next leg of their evolution, finding new pockets of demand away from the US and Europe, rethinking their capital needs and balancing organic growth with inorganic expansion to achieve better scale, VCCircle is organizing its debut edition of the Technology Investment Summit on March 19, 2021 on a virtual platform.