Consolidation to gather pace among IT firms

Mumbai: Scaling up and the need to build digital capabilities will lead to faster consolidation among the mid-tier information technology companies in India, domestic ratings agency Crisil said on Tuesday.

The IT companies' legacy businesses such as time and material contracts have become commoditised, posing significant growth and profitability challenges, it said, spelling out the reasons which will drive this consolidation.

Exit by promoters of tier II firms in the past two years who are capitalising on higher valuations and better growth prospects will also drive this trend, it said.

The agency said it has analysed 22 such mid-tier IT firms with turnover between Rs 1,000 - Rs 10,000 crore and found that there is a consolidation opportunity in Rs 33,000 crore worth of market capitalisation.