Market Size
USD 52 billion in CY12
Annual Growth Rate
17% for CY11-CY12
Exports
USD 40 billion in CY12
India's Share
60% of Global Outsourcing spend
Industry Median EV/EBITDA
7.2x (ttm)
Industry Median EV/Sales
0.7x (ttm)
Industry Median P/E
10.3x (ttm)
Indian IT Services Industry 2013
Indian IT Industry, which has transformed India’s image on the global platform, is a USD 52 Bn industry which grew at 17% during the year 2011-2012.
About USD 40 Bn is export revenue whereas the remaining USD 12 Bn is domestic revenue. Export revenue is growing at a rate of 19% compared to domestic revenue growth of 11% in dollar terms, affected by the depreciating rupee.
India is the world’s leading global sourcing destination for IT services with a share of 60% of global outsourcing spend. Bangalore, Hyderabad, Chennai, Delhi and Mumbai account for nearly 90% of this Industry’s exports.
“IT services is the use of technical expertise to support the management of information and processes in any establishments. IT services market can be segmented by the type of service: Project Based, Long-term outsourcing, and Support & Training”
Industry Trends
SMAC or Social networks, Mobile devices, Analytics / Big data and Cloud computing are emerging technologies that will profoundly change how companies operate, interact with customers, engage with employees, and bring innovative products and services to market.
Banking, Financial Services & Insurance (BFSI) and Telecom sectors continue to be the largest consumers of IT services as they form 60% of IT and ITeS exports in 2012.
Global Acquisitions by Indian IT firms
In 2012, IT and ITeS sector saw cross-border M&A transactions worth $1.4 Bn with a majority of the deals happening in Europe and North America. Primary reasons driving these acquisitions are:
- Increasing local presence in the US and Europe
- Acquiring employees with a specific skill set
- Strengthening their capability in a particular segment
|
Acquirer |
Target |
Country |
Rationale |
| TCS | Alti SA |
France |
Inroads into German and French markets |
| Infosys | Lodestone |
Switzerland |
Strengthening SAP consulting expertise |
| MphasiS | DigitalRisk |
US |
Acquiring US Clients and specialized skill |
| Wipro | Promax |
Australia |
Strengthening skills in Analytics area |
Market Share of Top 5 IT Companies
|
Company |
2012 IT Services |
2012 Market Share |
|
TCS |
9.0 |
17% |
|
Cognizant |
6.7 |
13% |
|
Infosys |
6.3 |
12% |
|
Wipro |
5.6 |
11% |
|
HCL Technologies |
3.7 |
7% |
|
Top 5 |
31.4 |
60% |
|
Indian IT Services Revenue |
52.0 |
100% |
|
Company |
EV/EBITDA |
EV/Revenue |
P/E |
|
TCS |
15.4x |
4.5x |
21.3x |
|
Cognizant |
10.5x |
2.2x |
18.1x |
|
Infosys |
9.2x |
2.6x |
13.8x |
|
Wipro |
11.6x |
2.4x |
15.4x |
|
HCL Tech |
9.8x |
2.0x |
14.6x |
|
Industry Median |
7.2x |
0.7x |
10.3x |
Source: Capital IQ, as of 31 May 2013; EV: Enterprise Value (measure of company's value); EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization (measure of company's profitability
|
Year |
Acquiring Company |
Target Company |
EV/EBITDA |
EV/Revenue |
|
2009 |
Tech Mahindra |
Mahindra Satyam |
9.1x |
1.6x |
|
2011 |
iGate Corporation |
Patni Computer Systems |
7.5x |
1.8x |
|
2006 |
Electronic Data Systems |
MphasiS BFL Ltd |
21.8x |
3.4x |
|
Date |
Target Company |
Private Equity |
Consideration |
|
Nov-12 |
KPIT Cummins |
ChrysCapital, CX Partners |
30 Mn |
|
Aug-12 |
AGS Transact Technologies |
Actis LLP Private Equity |
40 Mn |
|
Apr-12 |
Trimax IT Infrastructure & Services |
Aditya Birla Private Equity |
20 Mn |
|
Dec-08 |
CMS Computers Limited |
Blackstone Group |
50 Mn |
End Notes
Source: Analyst Reports, Company Press Releases, Yahoo Finance
CY: Calendar Year ending December
All multiples are as on Dec 31st 2012
Conversion Rate: 1 USD = 50 INR
ttm: trailing twelve months, or last twelve months
EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization - a measure of company’s profitability
EV: Enterprise Value - a measure of company’s worth
