Infosys scouting for acquisitions; more buys matching 'in-tech' scale possible, says CEO Salil Parekh

After two acquisitions this year, India's second-largest IT services company Infosys is on the lookout to scoop up more firms and says the acquisition matching scale of a recent in-tech buy is certainly a possibility.

In an interview with PTI, Infosys CEO Salil Parekh said the company is keen on acquisitions in areas like data analytics and SaaS and may look at some geographies within Europe and the US.

Asked if more acquisitions could be of the scale matching in-tech, which came with a price tag of 450 million euros, Parekh said, "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."

Back in January, Infosys announced a definitive agreement to acquire 100% of the equity share capital in InSemi Technology Services, a semiconductor design services company headquartered in India, for a consideration (including earn-outs, and management incentives and retention bonuses) totalling up to Rs 280 crore.

A bigger acquisition followed in three months.

In April, Infosys Germany, a wholly-owned step-down subsidiary, entered into a definitive agreement to acquire 100% of the equity share capital in in-tech Holding—a leading provider of engineering R&D services headquartered in Germany—for a consideration of up to 450 million euros (about Rs 4,045 crore).

"...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 the semiconductor side and one on the automotive side... very strong businesses, and we feel quite good about expanding that footprint," Parekh said.

Infosys is eyeing more acquisitions, he said, adding that the company is evaluating several firms.

"...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," he said.

Parekh, however, said a lot depends on strategic synergies, financial cost, cultural fit and integration aspects.

"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 the 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," the Infosys top honcho said.

On whether he is hopeful of closing more acquisitions this fiscal year, Parekh indicated that it is tough to put a timeline on the outcome of ongoing discussions.

"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 overall 501 deals, valued at $21.4 billion. The report said the second quarter of 2024 witnessed the highest quarterly volumes since the second quarter of 2022, while values declined due to the absence of big-ticket merger and acquisition transactions.

Grant Thornton Bharat Dealtracker further said the merger and acquisition (M&A) activity during the second quarter saw 132 deals worth $6.2 billion, marking a slight increase in volumes but a substantial 50% drop in values.

As per the report, domestic deals drove growth with volumes rising 29% and values increasing 2.5 times compared to the first quarter of the current year. In contrast, cross-border deals experienced a decline, with volumes decreasing 24% and values plummeting 85% from the first quarter of 2024.