India is witnessing a foundational Artificial Intelligence (AI) gap when compared to markets like the US and China. This is a topic of intense debate among market experts, policy wonks and the government. Many experts in the field say that this gulf is due to factors like a lack of substantial venture capital funding, constrained computer infrastructure locally and a sharp shortage of specialised R&D talent. Even the Indian stock market's underperformance of the last two years vis-a-vis emerging markets like South Korea and Taiwan has been attributed to the absence of AI and AI-related stock ideas.  

However, there is an emerging shift happening in the landscape. According to a report by Crisil, India’s information technology companies now do not view AI only as a delivery lever but more like an acquisition thesis itself. This shift is taking place to the backdrop of clients moving from pilots to enterprise-level deployments and service providers seeking rapid acquisition of AI, cloud, data engineering and domain capabilities.

An analysis of the top 26 Indian companies in the IT sector shows that almost half of the deals during the last two financial years were related to AI and allied technologies. This points to the fact that AI has graduated from experimentation to a priority for the company boards. The companies are therefore opting for an inorganic growth route in order to shorten the capability-building cycles.

This move augurs well for the Indian IT companies who are witnessing slower discretionary spending on technology across their major markets. There has also been a considerable slowdown in demand for traditional services spaces and a significant rise in demand for AI-led transformation. Underpinned by these factors, Indian IT companies are sharpening their portfolio and acquiring greater vertical expertise as well as special talent.

The positive aspect of this inorganic growth push is that the move has not had any major adverse impact on the balance sheet, as internal accruals, cash reserves, or equity swaps were the primary modes of funding. The debt component has been extremely limited, leading to the companies having
 financial flexibility.

“AI has become a strategic acquisition trigger for Indian IT companies. The objective is not merely to add scale, but also to enhance relevance through specialist talent, domain-ready platforms, marquee clients and sharper go-to-market capabilities. In a rapidly evolving technology cycle, acquisitions can shorten capability build-out timelines from years to months and help companies remain competitive as enterprise AI adoption gathers pace,” said Aditya Jhaver, director at Crisil Ratings.

A study of around 90 transactions in India’s IT sector shows that bolstering digital capabilities and expanding the geographic footprint were the main drivers. The strategic aims evolved in fiscal 2025 and 2026, with artificial intelligence becoming the primary driver of M&A activity. Also, more than 70% of acquired firms were American or European. These targets are particularly attractive due to their deep AI talent pools, proprietary platforms and sector-specific intellectual property.

“So far, deal discipline has played a vital role in preventing credit profile slippages. Most acquisitions have been modest relative to the acquirers’ net worth and funded largely without material debt. Therefore, while AI-led M&A should strengthen business positioning, we do not expect it to materially impair credit profiles, provided companies integrate assets effectively and avoid stretching balance sheets in pursuit of transformative bets,” added Joanne Gonsalves, associate director at Crisil Ratings.

Important deals

The report cites eight deals over the past two fiscal years to expand AI capabilities across healthcare, insurance, engineering, marketing and customer experience, according to company reports.

The acquisitions, all involving 100% stakes in the target companies, have a combined disclosed value of at least $4.41bn, excluding one transaction reported in Indian rupees.

Tata Consultancy Services (TCS) (NSE: TCS) accounted for two of the largest deals. It acquired Coastal Cloud for $700mn to accelerate its AI-first strategy by adding expertise in Salesforce Data Cloud and Agentforce. TCS also acquired marketing technology company ListEngage for $73mn to integrate AI into marketing automation and customer experience solutions.

Infosys (NSE: INFY) made two acquisitions, buying Optimum Healthcare IT for $465mn to strengthen its healthcare portfolio in the AI-driven market and Stratus Global LLC for $95mn to help insurers adopt AI-powered claims automation and related services.

Wipro (NSE: WIPRO) meanwhile, acquired Harman DTS for $375mn, aimed at strengthening its AI-powered digital engineering and device engineering capabilities in engineering research and development. Tech Mahindra (NSE: TECHM) was active too and acquired Com-Tec-Co for $354mn to expand its expertise in insurance, reinsurance and financial services, with a particular focus on digital engineering and AI and machine-learning capabilities.

Coforge (NSE: COFORGE) made the largest disclosed acquisition in the list, acquiring Encora for $2.35bn. The deal was aimed at creating an AI-led engineering company and scaling revenue.

Meanwhile, R Systems International (NSE: RSYSTEMS) acquired Novigo Solutions for INR9.33bn ($97.6mn), with the transaction intended to deepen AI integration, expand its workforce and strengthen its customer profile.