Infosys eyes more acquisitions, larger deals on horizon: CEO Salil Parekh

Infosys eyeing acquisitions: Infosys, India’s second-largest IT services provider, is exploring further acquisitions following two major deals this year. The company's CEO, Salil Parekh, has said that more acquisitions, similar to its recent in-tech purchase, are a possibility.

In an interview with PTI, Parekh shared that Infosys is targeting acquisitions in areas such as data analytics and Software as a Service (SAAS), and is also considering to expand its presence in certain European and US markets.

Large deals likely

When asked if future acquisitions could match the scale of the in-tech deal, which was valued at 450 million euros, "Absolutely, I think those would be the size that we will look at in terms of scale, and given our structure we could do a few of those," he answered.

Earlier this year, Infosys finalised an agreement to acquire InSemi Technology Services, an Indian semiconductor design company, for up to Rs 280 crore, including earn-outs and management bonuses. This was followed by a larger acquisition in April, when Infosys Germany acquired in-tech Holding, a leading German provider of engineering R&D services, for up to 450 million euros (approximately Rs 4,045 crore).

Parekh said that the company's recent acquisitions in engineering services have boosted its capabilities. “...we have very good business in engineering services already within Infosys and then we did those two acquisitions, both of them in engineering services, one on semiconductor side and one on the automotive side... very strong businesses, and we feel quite good about expanding that footprint,” he added.

Expanding global footprint

Parekh mentioned that the company is evaluating multiple potential targets, with a focus on expanding into new geographies. 

"We have a good balance sheet and good cash generation and now we are quite comfortable with the integration of acquisition in different areas. We have done engineering services, we will look at other areas... for example data analytics... may look at SAAS (software as a service) areas, and maybe at some other geographies in Europe, maybe the US as well," Parekh further said.

However, Parekh highlighted that several factors, including strategic fit, financial cost, cultural compatibility, and integration challenges, will influence these decisions.

“We are continuing to look, and we have things that are normally in the pipeline, but those take their own time... there are a lot of discussions on strategic fit, on financial cost of it and cultural fit into the company and then how will we integrate them. Many of those discussions are ongoing, and we will see what comes out,” he explained.

Evaluation process ongoing

When asked about the timeline for closing additional deals this fiscal year, Parekh acknowledged the uncertainty. "It is difficult to say... we are evaluating several (of them). But to get a fit on the strategic parameters, financial parameters, culture, integration... all of it may not work out. But these two (InSemi and in-tech) happened relatively quickly... before that for some quarters we had not done anything. It is not a predictable thing, but the evaluation is ongoing,” he said.

According to the Grant Thornton Bharat Dealtracker Q2 2024 report, Indian dealmaking saw a total of 501 transactions valued at $21.4 billion. 

The second quarter of 2024 recorded the highest quarterly deal volumes since Q2 2022, though deal values decreased due to fewer large-scale mergers and acquisitions.

The report further highlighted that merger and acquisition activity during Q2 saw 132 deals worth $6.2 billion, a slight increase in volume but a significant 50 per cent drop in value compared to previous quarters.

Domestic deals drove growth with a 29 per cent rise in volumes and a 2.5-fold increase in values compared to Q1 2024. 

In contrast, cross-border deals experienced a decline, with volumes down 24 per cent and values falling by 85 per cent from the previous quarter.