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March 11, 2014
Despite Higher Valuations, Threats Remain

Adapability Remains Key to Indian
IT Services Firms' Success


Since last November, when our firm last reported on the status of the Indian IT Services industry, valuations increased for both Tier 1 and Tier 2 companies. But, as before, challenges continue to face both groups: a significant valuation differences remains between Tier 1 companies and their Tier 2 counterparts. And changing customer demand from India's Western IT clients means keeping with the status quo is no longer an option.


martinwolf Senior Vice President and India Practice Managing Director Gaurav Sharma researched the indicators for increased valuations and analyzed what we should expect of the Indian IT Services market for the coming year in an article published by VCCircle Monday.  
Sharma found that along with growing confidence in and demand for IT Services companies, Indian firms have benefitted from a depreciated rupee-creating higher future earnings growth potential and a greater competitiveness in the global marketplace. 
The effect is more pronounced on smaller firms, which have a greater susceptibility to market forces. Since November 2013, Tier 2 firms have been growing slightly faster on both a revenue multiple and EBITDA multiple basis. On a revenue multiple basis, Tier 1 valuations have gone up from a 3.7x to 4x (6.7% increase) while Tier 2 valuations have grown from 0.9x to 1.1x (23% increase). For EBITDA, the numbers are similar: 15.1x to 15.9x for Tier 1 vs. 6.5x to 8.4x (increases of 5.5% and 29.5% increase, respectively).


Looking ahead, Garuav expects a continued convergence in the space as companies race to go big or go niche-and as Chinese IT Services firms increasingly turn to M&A to grow their own capabilities in response. 


To read more about Gaurav's thoughts on the changing landscape for Indian IT Services firms, read the complete article on VCCircle.

About martinwolf    


             San Francisco, CA                                                Bangalore, India

With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in nine countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies.    


The firm is also a presenting sponsor of the Global IT M&A Forum.   


martinwolf is a member of FINRA and SIPC. For more information, visit  


To learn more about martinwolf, contact Matthew Putzulu at


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