Analysts have dismissed the rumoured takeover bid by Indian outsourcing giant Infosys for IT services firm Capgemini as “far-fetched”.
Last week saw rumours that an acquisition was on the way following a report in the Times of India newspaper. The rumours sparked a rise in share prices for both Infosys, India’s second largest outsourcer, and Capgemini, whose key UK contracts include the Aspire contract at HM Revenue and Customs.
But Ovum analyst Phil Codling said: “Even on the scale of IT services takeover rumours, this is a pretty far-fetched one in our view.”
The major Indian outsourcers were aware of the strategic need to increase their UK capacity and higher value, longer-term service lines and Capgemini might – on paper – fulfil both requirements, he said.
But Infosys had been growing at 40% plus, with operating margins at just under 30%, and was “a sensational organic grower and profit generator” that was best in class even by the standards of India’s IT industry, he added.
“The burden of integrating a slower-growing, less profitable firm based in another continent and with 75,000 people spread around the world would surely risk stopping this smooth-running machine in its tracks,” Codling added.
Infosys would do better to respond to the strategic challenges ahead by hiring in the UK – as it is already – and by making “less disruptive acquisitions”, he said.
The Indian outsourcing giant “didn't get where it is today by making unpredictable, risky moves”, Codling said. “On balance, there's really no realistic prospect of this rumoured acquisition taking place.”
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