17 - 08 - 2026

AI drives nearly half of M&As mergers in Indian IT sector in last two fiscals

Artificial intelligence (AI) is increasingly becoming the acquisition thesis in India as clients move from pilots to enterprise-scale deployment and has moved from experimentation to a boardroom priority.

Of the about 90 M&A (mergers and acquisitions) deals assessed in the Indian IT sector, acquisitions between fiscals 2019 and 2024 were primarily aimed at augmenting digital capabilities such as cloud computing, process automation and analytics, or expanding geographical reach. Over the past two fiscals, however, AI has emerged as the defining theme, alongside related capabilities such as data engineering, digital engineering, engineering research and development (ER&D) and enterprise platforms, according to an analysis of 26 Indian IT companies by Crisil.

The shift is also well-timed. Softer discretionary technology spending, pressure on traditional services growth and rising demand for AI-led transformation are prompting IT companies to sharpen their portfolios, deepen vertical expertise and acquire differentiated platforms or specialist talent in priority markets.

“AI has become a strategic acquisition trigger for Indian IT companies. The objective is not merely to add scale, but also to enhance relevance through specialist talent, domain-ready platforms, marquee clients and sharper go-to-market capabilities. In a rapidly evolving technology cycle, acquisitions can shorten capability build-out timelines from years to months and help companies remain competitive as enterprise AI adoption gathers pace,” Aditya Jhaver, Director, at Crisil Ratings said.

Importantly, this inorganic push has not materially weakened balance sheets. Most transactions have been funded through internal accruals, cash reserves or share swaps, with limited reliance on debt, preserving financial flexibility even as companies reposition for an AI-first demand cycle.

Capability-led, largely low-leverage deals should keep the credit profiles of acquirers resilient, it added.

Outbound acquisitions

Most acquisitions over the past two fiscals were outbound, with more than 70 per cent of targets based in the United States and Europe. These markets offer deeper pools of AI talent, proprietary platforms and sector-specific intellectual property, making them attractive hunting grounds for Indian IT companies looking to acquire globally relevant capabilities.

For acquirers, the rationale is compelling: gain specialist capabilities, access referenceable clients and embed AI into existing offerings faster than organic investments would allow. This is particularly relevant in areas such as generative AI, agentic AI, cloud-native platforms, digital engineering and industry-specific automation.

That said, any impact on credit profiles will hinge less on deal announcements and more on execution. Successful integration, cross-selling, talent retention and timely monetisation of acquired AI capabilities will determine whether these transactions translate into durable revenue growth and stronger business profiles.

 “So far, deal discipline has played a vital role in preventing credit profile slippages. Most acquisitions have been modest relative to the acquirers’ net worth and funded largely without material debt. Therefore, while AI-led M&A should strengthen business positioning, we do not expect it to materially impair credit profiles, provided companies integrate assets effectively and avoid stretching balance sheets in pursuit of transformative bets,” Joanne Gonsalves, Associate Director, Crisil Ratings said.