New Delhi: India’s technology sector is undergoing a decisive recalibration, with Q1 2026 data pointing to a sharp tilt toward high-value, selective deal-making even as overall activity moderates.
According to Grant Thornton Bharat’s ‘Dealtracker’, the January-March quarter recorded 68 deals worth $3.9 billion, including IPO and QIP activity, marking the highest deal value since Q3 2022. While volumes declined 8% quarter-on-quarter, total deal value rose 43%, underpinned by two large transactions accounting for nearly $3 billion.
Even if public market activity (IPOs and QIPs) is excluded, the trend remains intact. The sector logged 66 deals valued at $3.4 billion, reflecting a 7% drop in volumes but a robust 39% increase in value over Q4 2025. On a year-on-year basis, deal volumes fell 26% even as values surged 208%, underscoring a structural pivot toward fewer but significantly larger transactions.
Raja Lahiri, Partner, Grant Thornton Bharat, said, “India’s technology deal landscape is undergoing a structural shift, with capital increasingly concentrated in fewer, high-conviction opportunities. AI, particularly generative AI, is becoming central to investment decisions, influencing both valuation frameworks and strategic priorities.”
He added, “We are seeing a clear move towards capability-led acquisitions, especially in AI, cloud, and digital engineering, as Indian companies strengthen their position as global consolidators. Going forward, deal-making will be defined more by quality, scale, and long-term value creation rather than volume.”
The shift is most visible in the mergers and acquisitions (M&A) landscape, where activity held steady at 21 deals but values more than tripled to $2.6 billion quarter-on-quarter. A single marquee outbound transaction — Coforge’s $2.4 billion acquisition of Encora Inc — dominated the quarter, lifting the average deal size nearly threefold from $38.1 million to $122.3 million. Outbound deals surged to their highest quarterly levels, contributing about $2.5 billion, or roughly 97% of total M&A value, across nine transactions, signalling an aggressive push by Indian firms to expand globally through capability-led acquisitions.
Domestic M&A activity, while leading in volumes with 10 deals, contributed only about 2% of total value, highlighting the widening gap between strategic intent and capital deployment within the domestic market. Inbound transactions remained muted, with just two deals and undisclosed values, reinforcing the narrative of India Inc increasingly driving consolidation on its own terms. M&A has consequently emerged as the principal engine of deal value growth for the sector.
PE Trend
Private equity activity, by contrast, reflected a more cautious stance. The quarter saw 45 deals worth $848 million, marking a 49% decline in value and a drop in volumes from 50 deals in each of the previous two quarters.
The absence of large-ticket investments skewed activity toward smaller deals, indicating tighter filters and a more risk-aware investor base. A single transaction — Neysa Networks’ $600 million fundraise — accounted for nearly 71% of total PE value, further illustrating the concentration of capital in select opportunities.
Even so, private equity and venture capital continued to dominate deal volumes, contributing about 66% of overall activity, with sustained traction in early- and mid-stage investments, particularly in AI-led and enterprise technology segments.
Sectorally, the divergence in capital flows is becoming more pronounced. Technology start-ups saw a pickup in M&A activity with six deals, the highest in five quarters, driven largely by acqui-hire and IP-led capability acquisitions, though values remained subdued. On the funding side, start-ups attracted 29 PE/VC deals worth $699 million, reflecting strong early-stage momentum but continued caution in large growth funding, pointing to a distinctly two-speed market.
Technology service providers emerged as the primary beneficiaries of the quarter’s value surge. M&A activity remained resilient with 14 deals, while values spiked to $2.6 billion, largely on the back of the Coforge-Encora transaction. In contrast, private equity participation in this segment remained limited, with just seven deals worth $62 million, indicating a clear preference for strategic consolidation over financial investment.
The enterprise software and SaaS segment, meanwhile, showed signs of pause. M&A activity dropped sharply to a single deal with negligible value, signalling increased selectivity and a slowdown in strategic consolidation. Private equity activity held steady at nine deals worth $87 million, but the shift toward smaller, capital-efficient investments and profitability-led growth suggests a recalibration in investor expectations.
The GTB Dealtracker data points to a technology sector in transition. Scale, strategic fit and technological depth are eclipsing volume as the defining metrics of deal-making. AI, cloud, and digital engineering capabilities are emerging as the new currency, reshaping both acquisition strategies and capital allocation patterns across the ecosystem.
(Cover photo by Firosnv. Photography on Unsplash)