Mid-sized IT companies are utilising their cash reserves in a more productive way
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AndreyPopov
Compared to their larger-sized peers mid-sized IT companies are utilising their cash reserves in a more productive way by reinvesting in their businesses, strengthening their capabilities and making strategic acquisitions.
Smaller IT companies’ dividend payouts at 18-22 per cent of their cash holdings is much lower than the 50-95 per cent allocation by the larger companies, according to data provided exclusively to businessline by CAREEdge Research.
According to Kranthi Bathini, Director, Equity Strategy at WealthMills Securities, rewarding shareholders via dividends has always been a strategy for large caps whereas mid-size companies, with comparatively lower cash flow levels, are more work-centric.
Hexaware recently acquired SMC Squared to boost its GCC solutions, KPIT Tech acquired Caresoft Global’s engineering solutions business to strengthen its commercial vehicle vertical, while last year Coforge had acquired Cigniti, the deals cumulatively worth well over ₹1,000 crore. Last month Mphasis acquired a 26 per cent preferred equity stake in Aokah, a Platform-as-a-Service (PaaS) company designed to help enterprises set up, scale, and optimize next-gen GCCs.
These acquisitions elevate the long-term values of mid-size company shares as it indicates the focus and vision of the company.
To give a comparison over a five-year period, shares of TCS has appreciated 36.5 per cent and that of Infosys 59 per cent. In the same period Coforge’s shares have risen 4.4 times, Mphasis 2.4 times and KPIT Tech 13.5 times.
“The value of the shares itself depends on individual company strategy. There is a sense that large-cap IT firms have not been spending the adequate amount of their cash flows in terms of R&D and technology, compared to global companies and mid-caps. However, they have also given very good returns over the years,” Bathini said.
Another equity analyst pointed out that as long as the company is buying assets which are EPS accretive , market will appreciate it by share price rise and the reverse if it is EPS dilutive.
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Published on August 24, 2025