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IT services industry: Is cash still the king?

Cashflows have always been a crucial measure for any company’s financial performance. Any liquidity crunch will trigger a crisis or excess liquidity may erode shareholder’s value. Therefore, striking a balance becomes one of the pivotal corporate decisions to be made by any leader.

For Indian IT companies, which have always been cash-rich, capital allocation strategies have become extremely important for increasing the shareholders’ value. Especially in the last few years, Indian IT companies have increased cash return to investors in an unprecedented fashion to maximise the shareholder’s value. With the emergence of emerging digital technologies, Indian IT companies, in order to stay relevant, have equally retained their focus on acquisitions to expand their digital footprint and new-age service offerings.

To delve further into the capital allocation strategies adopted by Indian IT companies over the last three years, starting from FY2017 to FY2019, this publication assesses the cash position of the major publicly listed large and mid-cap IT services companies, which constitute more than 90% market cap of the overall Indian IT services industry.

We hope you will find this publication insightful and informative.