Coronavirus Wipeout: $13 Billion Firepower That TCS, Wipro And Infosys Can Use

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Coronavirus wipeout: $13 billion firepower that TCS, Wipro and Infosys can use

The economic downturn due to Coronavirus is tough for businesses across the world. However, slowdown also in some cases offer opportunities. Analysts see the current downturn as the right time for Indian IT giants to buy companies due to lower valuations. The current Covid crisis has led to erosion in valuations of most companies. This can be an opportunity for TCS, Infosys, Wipro and other IT companies to look for acquisitions or buyout captives of global giants. Here’s look at how and why Indian IT companies are well-placed to execute acqusitions right now.

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TCS, Infosys and Wipro collectively have cash reserves of more than $13 billion

The cash reserves give them ammo for acquisitions in a downturn. Cash reserves give them the required firepower in a downturn to help them buy smaller rivals with niche skills.

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Why acquisitions now

Acquisitions during this time can help these companies gain strategic capabilities and market access. These will be big asset once the business is back to normal.

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Hottest tech & platforms: Eye skillsets in areas of cognitive and self-healing IT platforms and cloud-based security solutions

Some of the areas which are in hot demand include technologies in cognitive and self-healing IT platforms as well as cloud-based cyber security solutions.

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TCS’ largest M&A to date has been during global financial crisis

During post-earnings call recently, TCS CEO Rajesh Gopinathan said that the company’s largest M&A to date was actually executed at the peak of the global financial crisis. TCS acquired Citigroup’s captive business process centre in India for $505 million during the height of the 2008-09 US recession. The acquisition helped it sign a decade-long $2.5 billion contract with the global bank.

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TCS: We are not shy of acquisitions

TCS CEO further said that the company is not shy of M&As and that it believes that the best time to execute it is when nobody else is buying. “…And if this current market throws up those opportunities, we would definitely snap them up,” Gopinathan added.

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TCS, Infosys and Wipro’s net cash holdings stood at $5.9bn, $3.6bn and $3.53bn, respectively, at the end of March 2020.

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Wipro: Could look at a possible well-priced M&A opportunity

Despite slowdown, Wipro too remains open at deploying cash for more mergers and acquisitions. “This could be the time (when) we could even look at a possible well-priced, M&A opportunity without having to worry about whether we have sufficient cash or not,” Wipro CFO Jatin Dalal told Economic Times recently.