Infosys, Wipro scout to pick up stake in startups, raise investment bankers' hopes for more deals

BANGALORE| MUMBAI: Vishal Sikka at the helm of Infosys and Rishad Premji as head of strategy at Wipro scouting to pick up stake in startups focused on disruptive technologies have made investment bankers optimistic that country’s moribund outsourcing sector could see more deals in the coming months.

However, both foreign and domestic bankers believe that the small acquisitions and partnerships would not be enough and a big buy-out has to be done before the rainmakers who help companies merge and raise capital could raise a toast.

“The mood certainly has changed,” said the head of a Mumbai-based investment bank, adding “and changed for the better”. “We have seen Wipro picking stakes in small companies. Infosys too has decided to follow a similar approach. So it’s just a matter of time before one of these make a big buyout.”

Infosys, which last acquired Swiss management consultant Lodestone for $350 million in 2012, has strutted when it comes to buyout during this time, making many believe that change in leadership could help the company shun its conservative approach.

“Certainly, the outlook has changed and we have started getting calls,” said a senior executive from Infosys merger and acquisition team. “We won’t go for making a big ticket deal unless there is absolutely a compelling rationale. (For now) our sweet spot remains $100-250 million.”

Wipro too is adopting a similar approach, with chief executive TK Kurien telling ET last month that the way ahead for the company is having a more “asset light approach”, with a senior executive adding that the company will look to have more buy-outs in $100-200- million space.

For now, both Wipro and Infosys maintain that they will look at partnerships and buyouts in disruptive technologies, including artificial intelligence and big data as they do not want to be saddled with a heavy workforce. Both these companies are looking to scale up their presence in healthcare and retail space and partnership or a buyout with start-focused on these newer technologies could be done in the coming months, according to bankers and company executives.