Captive buyouts: Are IT cos scaling up or skilling up?

Indian IT companies are increasingly acquiring client technology units and specialised businesses to anchor much larger, long-term partnerships, in what amounts to a captive centre redux, according to Shilpa Phadnis' report by Times of India (TOI). The playbook, as TOI put it, is simple: buy the captive, win the bigger deal.

The trend has revived an old debate on whether these deals are about acquiring capabilities or simply adding to capacity, TOI reported. The strategy is being driven partly by the need to grow contract values as organic revenue growth slows for Indian IT firms and artificial intelligence reshapes traditional technology spending.

Acquisitions that bring next-generation capabilities in areas such as cloud, data and AI can command valuations of three to four times revenue, while captive carve-outs are often valued at less than half those multiples, per the report.


TCS, for instance, is acquiring Porsche's technology subsidiary MHP for $373 million as part of a five-year strategic partnership worth $1.4 billion, TOI reported. MHP had revenue of about $865 million in 2025. Earlier this year, Wipro agreed to buy Singapore-based Olam Group's digital arm for $375 million alongside a deal with a total contract value expected to exceed $1 billion, including about $800 million in committed spending, according to the report.

HCLTech recently agreed to pay $225 million for HPE's Communications Technology Group, gaining IP, engineering talent and customer relationships that strengthen its telecom business. Infosys, meanwhile, acquired Danske Bank's 1,400-person IT centre in India while securing a $454 million contract.

Deja vu for GCCs?

Ramkumar Ramamoorthy, partner at tech growth advisory firm Catalincs, told TOI that the recent acquisitions of the in-house technology arms of Porsche, Guardian Life, Olam and Telstra are a precursor to what will happen to global capability centres (GCCs) considered non-core assets by their parent companies.

He described it as a redux of what happened years ago when captive arms of global companies such as Citigroup, Mitsubishi, UBS, Unilever, BASF, Deutsche Telekom and American Express were acquired by IT services and BPM firms.

The strategy itself is not new, TOI noted. In 2008, TCS bought Citigroup's stake in Citigroup Global Services, its India-based business process outsourcing captive, for $505 million. In 2009, Cognizant acquired UBS India Service Centre, the Hyderabad-based captive service provider to UBS.

Peter Bendor-Samuel, founder and chairman of the Everest Group, told TOI that Porsche is facing brutal competition from China and increased tariffs in the US, and is restructuring as part of that process. He added that it remains unclear how much TCS will benefit from the partnership outside of Porsche.

With inputs from TOI