IT space to see 50 per cent rise in M&As

With a gradual erosion in valuation of mid- and small-sized IT and IT enabled services (ITeS) firms on the stock markets due to rupee fluctuations and a US slowdown, experts estimate as much as 50 per cent rise in merger and acquisition deals in the domestic IT industry over the next 12 months.

"There will be a 50 per cent growth in value for merger and acquisition deals in the domestic space of the IT and ITeS industry," says CG Srividya, partner, specialist advisory services, Grant Thornton. In 2007, as many as 59 pure merger and acquisition deals took place in the domestic IT and ITES space, together valued at $370 million (around Rs 1,550 crore). The figure, accordingly, is expected to be slightly over Rs 3,000 crore.

"The cost advantage for domestic IT and BPO companies has reduced in the last two years, especially with salary levels increasing and rupee appreciating against US dollar," she said. On an average, there has been a 15 per cent rise in employee's salary in last three to four years. And the value of rupee against the dollar appreciated from its lowest level of Rs 46.9 in July 2006 to Rs 39.25 in October 2007. On Wednesday, rupee stood at 42.98 against the US dollar. There are around 250 IT and ITeS firms listed on the Bombay Stock Exchange