Global Private Equity Firms Circle Indian IT Firm in Major Deal
A significant transaction is taking shape in India's technology landscape, as several of the world's largest private equity firms are currently evaluating a potential buyout of software services company ValueLabs. The deal, which could value the Hyderabad-based firm at approximately $1 billion, underscores a major bet on the resilience and growth potential of the enterprise technology sector emerging from India.
Who Are The Suitors and What is the Deal Status?
According to sources familiar with the matter, global private equity majors including EQT Partners, PAG, Blackstone, and CVC Capital Partners are among the suitors in active discussions to acquire a controlling stake from the company's promoters, the Donakanti family. The investment bank Goldman Sachs is reportedly advising the promoters on the sale process.
"Currently, due diligence is on," revealed one person with direct knowledge of the development. The same source indicated that the first round of bids is expected by the end of November. While these four firms are key players, other private equity firms and large strategic acquirers from the same or adjacent industries are also likely to consider the opportunity.
ValueLabs: An AI-Powered Contender in the IT Arena
Founded in 1997 by Arjun Rao and his family, ValueLabs has grown into a formidable player in the IT services space. The company describes itself as an agentic artificial intelligence service provider, a term for AI systems capable of making decisions without human intervention. It boasts a workforce of over 7,000 engineers and serves a diverse portfolio of more than 300 enterprise clients.
Its service offerings are extensive, covering product development, quality engineering, cybersecurity, and data & analytics. These services cater to critical sectors such as banking, financial services, healthcare, insurance, and education. In the market, ValueLabs competes with both IT giants like Infosys, Cognizant, and Wipro, and AI-focused firms such as Fractal Analytics and Happiest Minds.
Financially, the company's latest available data shows it posted a standalone revenue of $74.1 million in fiscal year 2024, a slight dip from $74.9 million the previous year. Its profit also saw a decrease, settling at $5.6 million in FY24, down from $7.1 million a year earlier, according to data from Tracxn.
A Broader Trend: PE's Growing Appetite for Indian IT
This potential acquisition is not an isolated event but part of a larger, growing trend. Global private equity firms are increasingly placing big bets on mid-sized information technology and enterprise technology services providers originating from India. They view this sector as a unique combination of high growth and stability.
This trend is evidenced by several other recent deals. For instance, EQT has previously invested in Indium, an AI-focused digital engineering firm, and in the consultancy Perficient. In another move, TPG-backed Altimetrik acquired tech services provider SLK Software. Furthermore, Brighton Park Capital invested in TheMathCompany, a data analytics firm. Mint also reported in July that early investors in Accion Labs Holdings were exploring an exit at a valuation of around $1 billion.
If the ValueLabs deal proceeds, the promoters are expected to retain a minority stake in the company, maintaining some involvement in the business they built. This potential $1 billion valuation signals strong confidence in the future of homegrown, innovation-driven technology firms in India, positioning them as attractive assets for the world's most sophisticated investors.
