AI Drives Nearly 50% of M&A Deals at Top Indian IT Firms: Crisil

Nearly half of acquisitions by India’s top 26 IT companies over the past two fiscals were driven by considerations around artificial intelligence and allied technologies, a report said on Monday. Capability-led, largely low-leverage deals should keep the credit profiles of acquirers resilient, the report from Crisil Ratings said. The ratings agency said that AI has become the acquisition thesis as clients move from pilots to enterprise‑scale deployment and service providers seek to rapidly acquire AI, cloud, data engineering and domain capabilities.

"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," said Aditya Jhaver, Director, Crisil Ratings. In a rapidly evolving technology cycle, acquisitions can shorten capability build-out timelines from years to months and help companies remain competitive, he added.

Out of nearly 90 M&A deals assessed by the firm, many earlier transactions aimed at augmenting digital capabilities such as cloud computing, process automation and analytics, or expanding geographical reach. However, over the past two fiscals, AI and related capabilities such as data engineering, digital engineering, ER&D and enterprise platforms have dominated deal rationales.

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. "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," the firm said. Most acquisitions over the past two fiscals were outbound, with over 70 per cent of targets based in the United States and Europe, as these markets offered deeper pools of AI talent, proprietary platforms and sector-specific intellectual property.

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