India's information technology giants are embarking on an unprecedented shopping spree. In a dramatic strategic pivot, the country's ten largest IT services firms have announced acquisitions worth a record $4.3 billion in the current fiscal year (FY26). This marks the highest spending on buyouts since the turn of the century, signaling a fundamental shift from rewarding shareholders to aggressively acquiring new competencies in artificial intelligence (AI) and cloud technologies.
From Shareholder Payouts to Strategic Buyouts
This acquisition frenzy represents a stark reversal from recent priorities. Just last fiscal year (FY25), these same ten companies paid a massive $10.8 billion (approximately ₹96,557 crore) in dividends and share buybacks, compared to only about $1.5 billion spent on acquisitions. The contrast is even starker when looking back to FY22, where buyouts accounted for roughly ₹27,000 crore against shareholder payouts of ₹81,669 crore.
Notably, several cash-rich firms are now channeling more funds into purchases than into investor returns. Companies like Coforge Ltd and Hexaware Technologies Ltd exemplify this new direction. For instance, Coforge has deployed a staggering ₹21,450 crore on acquisitions in the first nine months of this fiscal, while its shareholder payouts stood at a mere ₹260 crore during the same period.
Leaders and Mid-Tier Firms Drive the Deal Flow
The acquisition wave is being led by both industry stalwarts and ambitious mid-tier players. Tata Consultancy Services Ltd (TCS), traditionally known for its risk-averse nature and in-house development, has become a key driver. TCS agreed to spend $773 million to acquire US-based digital marketing firm ListEngage and Salesforce consultant Coastal Cloud. In a significant signal of intent, TCS recently informed analysts it "will be more acquisitive, mainly for capabilities."
However, the most eye-catching deal comes from the mid-tier. Coforge announced the largest acquisition by an Indian IT firm, agreeing to buy US software company Encora in an all-stock deal valued at $2.39 billion. Other major players like Infosys Ltd, HCL Technologies, and Wipro Ltd collectively spent $1.03 billion to buy seven companies in areas like data analytics and cloud computing in the first three quarters of FY26.
The Urgency Behind the Spending Spree
Experts point to a pressing need for speed and relevance in a fast-evolving tech landscape. Phil Fersht, CEO of HFS Research, notes that the old playbook of building everything internally has expired. "What we are seeing now is urgency. Acquisitions are used to buy speed, relevance, and proximity to demand in areas such as cloud, data, AI platforms, and industry-specific capabilities," Fersht explained. This strategy is a direct response to compressed technology cycles and the threat from global competitors and hyperscalers.
The spending surge comes against a backdrop of slowing growth for the sector. While TCS, Infosys, and HCLTech reported modest revenue growth last fiscal, Wipro and Tech Mahindra saw declines. This tepid performance has dampened investor sentiment, with most IT stocks lagging the surging BSE Sensex.
Amit Chandra of HDFC Securities observes that companies have realized that higher payouts alone aren't boosting their allure. "This is a shift in strategy. Companies will continue to prioritize acquisitions in order to drive valuations and chase growth," he stated. However, this buyout spree carries risks, including potential erosion of profitability due to high talent retention costs from acquired firms.
As Indian IT navigates this transformative phase, the consensus is clear: the era of conservative capital allocation is giving way to aggressive, capability-driven acquisitions. Shareholder payouts are likely to moderate as firms invest heavily to close critical gaps and secure their future in the AI-driven digital economy.
