Cash-rich Indian IT services companies go aggressive in M&A space

As capital allocation is altered, dividend payout to dip in the ongoing financial year

As growth slows owing to the pandemic, cash-rich tier-I IT services companies are pursuing organic growth, including acquisition, indicating a change in capital allocation policies.

Apart from mergers and acquisitions (M&As), even large rebadging deals (outsourcing work while reducing employee strength) and buying out captives of global firms are part of these initiatives.

This is being done to drive revenue growth at a time most firms posted a revenue decline in sequential terms in Q1 of FY21, which is traditionally considered to be a strong quarter for IT services companies.

“Most demand is coming from the cloud space, which the