Shifting Preference? Large IT Companies Are Losing Out To Midcaps | Open Interest
The top six companies’ combined revenue share declined from 91.2% in FY22 to 89.5% in FY25 — a drop of 170 basis points.
As geopolitical uncertainty challenges growth and disrupts traditional business models, the Indian IT sector finds itself at a crossroad. On one side is the lure of scaling up and on the other is the need to be agile. In the current scenario, scale, which typically provides leverage, is turning into a disadvantage when it comes at the cost of being agile and responsive to client needs.
Recent commentary from Accenture and TCS highlights that while discretionary spending remains muted, clients are now seeking IT services partners that are more nimble and better aligned to their evolving needs. Clients increasingly want AI integration built into deal negotiations, along with assurances of productivity gains from these transformation projects.
Most AI-related deals for IT services firms involve re-engineering existing frameworks to make enterprises GenAI-ready. Lately, agentic AI-linked projects are also being discussed, although on a smaller scale. Clients are not only consolidating vendors but are also evaluating the quality and value delivered by large IT firms more critically than before.
A Visible Shift
There is a shift in preference towards working with smaller IT companies for specialised projects. Compared to large firms, mid and small-sized players offer greater flexibility, faster execution, and lower costs, making them more attractive for specific, time-bound needs.
This shift is visible in the revenue share trends within the Indian IT sector. Top-tier IT companies have gradually ceded market share to mid- and small-sized peers.
IT Sector: Top Players Versus Rest
India’s top 20 IT companies (with market caps above $1 billion) have collectively lost nearly 15% of their value since October 2024. The sector’s top tier — comprising TCS, Infosys, HCL Technologies, Wipro, L&T Mindtree, and Tech Mahindra — sits at the core.
The second tier includes Persistent, Oracle Financial Services, Coforge, Mphasis, Tata Elxsi, and KPIT Technologies.
The third tier includes Zensar Technologies, Intellect Design, Newgen Software, Sonata Software, Birlasoft, and Happiest Minds. LatentView and AurionPro are emerging micro-cap IT players.
Together, these 20 companies have grown revenues by nearly 33% over the last three years (FY22–FY25). However, this growth is not evenly spread. The cohort grew revenue by 32.7% overall, but the top six IT majors grew at only 30.3%, while the six mid-cap IT companies grew at 59.6% and the six small-cap firms grew at 51.9% — clearly showing that mid-cap players are driving industry growth.
The top six companies’ combined revenue share declined from 91.2% in FY22 to 89.5% in FY25 — a drop of 170 basis points. In contrast, the mid-cap group’s share rose by 120 basis points to 6.8%, and the small-cap group’s share increased by 40 basis points to 3.4%.
This shift in revenue share and growth momentum is reflected in market performance too. Mid-cap IT companies are now trading at a premium compared to their larger peers. Since October, only four companies — Persistent, Coforge, Zensar Technologies, and Intellect Design — have delivered positive returns.
India’s IT sector grew by 5% in FY25, reaching $500 billion in revenue. The top 20 listed firms account for nearly 20% of this.
The challenge for large IT companies is to protect their dominant revenue share while adapting to new demands. The opportunity for mid- and small-sized players is to leverage their agility and specialisation to get their foot in the door and win business that was once reserved for the giants.
