India’s technology sector is experiencing a strategic shift toward larger and fewer deals, with a significant increase in total deal value despite a drop in overall volumes, as noted in Grant Thornton Bharat’s Dealtracker report.
In Q1 2026, the sector saw 68 deals valued at $3.9 billion, which includes IPO and QIP activities, marking the highest quarterly deal value since Q3 2022. This growth occurred alongside an 8% decrease in deal volumes, indicating a tendency to concentrate capital in high-value transactions.
When excluding public market activities, there were 66 deals with a combined value of $3.4 billion, reflecting a 7% reduction in volumes, yet a 39% rise in value compared to the previous quarter. Year-on-year, volumes decreased by 26%, whereas deal values jumped by 208%, highlighting a shift in capital allocation.
India’s technology deal landscape is evolving, with capital concentrating more on fewer, high-conviction opportunities, according to Raja Lahiri, Partner and Technology Industry Leader at Grant Thornton Bharat. He mentioned that AI, especially generative AI, is becoming pivotal in investment decisions, affecting both valuation methods and strategic objectives.
Additionally, he remarked that there is a noticeable trend towards acquisition strategies focused on capabilities, particularly in AI, cloud, and digital engineering, as Indian firms strengthen their roles as global consolidators. The future of deal-making will rely more on quality, scale, and long-term value creation rather than sheer volume.
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Mergers and Acquisitions Drive Value Surge
Mergers and acquisitions served as the main contributor to the surge in deal value this quarter, with 21 transactions totalling $2.6 billion—more than three times the value recorded in the previous quarter.
This increase was primarily due to a significant outbound deal, Coforge’s $2.4 billion acquisition of Encora Inc, which raised the average deal size from $38.1 million to $122.3 million compared to the last quarter.
Outbound deals prevailed, contributing approximately $2.5 billion or nearly 97% of total M&A value, signalling a robust commitment from Indian firms to pursue cross-border expansion and capability-focused acquisitions. Conversely, domestic transactions contributed largely to the volume but only about 2% of the value.
The report highlighted a notable trend towards “strategic, outbound-led consolidation,” where Indian IT firms increasingly act as global consolidators.
Private Equity Turns Cautious
Private equity and venture capital activity slowed, with 45 deals bringing in $848 million, reflecting a 49% decline in value sequentially.
This downturn primarily stemmed from a lack of large-scale investments, as activities shifted towards smaller transactions. Notably, Neysa Networks’ $600 million fundraising represented around 71% of total PE value, indicating a concentration of investment in select opportunities.
Despite this caution, PE/VC continued to dominate overall deal volumes, accounting for about 66% of total activity, with sustained interest in early and mid-stage investments, particularly in AI and enterprise technology.
Two-Speed Market Across Segments
The report pointed to a clear discrepancy across different segments, characterising it as a “two-speed market” within the tech ecosystem.
In the start-up sector, M&A activity rose to a five-quarter high with six deals, primarily driven by acqui-hiring and IP-focused acquisitions, although deal values remained subdued. PE/VC experienced 29 deals worth $699 million, reflecting strong momentum in early-stage funding while remaining cautious regarding larger growth investments.
Technology services companies significantly influenced overall deal value, with 14 M&A transactions accounting for $2.6 billion, mainly led by outbound operations. In contrast, enterprise SaaS experienced a marked slowdown in M&A, featuring merely one deal throughout the quarter, signalling increasing selectivity among buyers.
AI Reshapes Dealmaking Priorities
A prominent theme from the report is the rising impact of artificial intelligence, especially generative AI, on deal activity and valuations.
It noted that assets with “credible AI capabilities” are attracting premium valuations, while traditional models are now under increased scrutiny. Investors are increasingly focusing on scalability, profitability, and the capacity to integrate AI into fundamental offerings.
In essence, the sector is transitioning from a volume-driven cycle to a phase defined by strategic discipline and intent.
Lahiri commented that the next phase of deal-making is likely to emphasise quality, scale, and strategic objectives over volume.
