- Nomura reiterates 'Buy' on Infosys, targeting Rs 1,810, citing 225 bps revenue growth by FY27
- Morgan Stanley rates Infosys 'Equal-weight'with Rs 1,760 target
- Citi maintains 'Neutral' on Infosys, warns of integration risks and growth sustainability concerns
Brokerages are divided on Infosys after its $560 million twin acquisitions, balancing the promise of incremental growth against concerns around margins and execution.
Nomura remains the most constructive, reiterating a Buy with a target price of Rs 1,810. It expects the deals to add around 225 basis points to FY27 revenue growth, driven by stronger positioning in healthcare and life sciences, and continues to back Infosys as a top large-cap IT pick.
Morgan Stanley, with an Equal-weight rating and Rs 1,760 target, takes a more tempered view. It estimates a lower 1.2% revenue contribution and expects the deals to be neutral to slightly dilutive to earnings, citing lower EBIT margins at the acquired entities and amortisation costs.
Citi is the most cautious among the three, maintaining a Neutral stance with a Rs 1,395 target price. It sees 1.6% annualised revenue upside but flags key risks - including integration challenges and questions around the sustainability of growth at Optimum Healthcare. It also points out that M&A outcomes in the Indian IT sector have historically been mixed.
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The Deals
Infosys has announced the acquisition of Optimum Healthcare IT for $465 million and Stratus Global for up to $95 million, marking a clear push to deepen its presence in the US healthcare and insurance segments.
Optimum Healthcare IT, a digital transformation firm serving hospitals and payers, brings over 1,600 professionals and a fast-growing revenue base, with CY25 revenues at $275.9 million. The deal is valued at 1.7x price-to-sales, reflecting its scale and recent growth momentum.
Stratus Global, focused on property and casualty insurance technology, adds niche capabilities in platform modernisation and consulting. With CY25 revenues of $42.8 million, the deal is priced at 2.2x price-to-sales.
Financial Impact
Analysts estimate the two acquisitions together could contribute 1.2% to 2.2% to Infosys' FY27 revenues, with broader inorganic growth - including earlier deals - potentially adding up to 2-2.5%. However, the near-term impact on profitability is expected to be modestly negative. Lower margins at the acquired firms and integration costs could weigh on earnings initially, though improved offshoring and scale benefits may support margins over time.
Infosys' latest moves signal a more aggressive M&A strategy as the IT sector grapples with slowing organic growth and cautious client spending. With three deals now pending closure, the company is clearly leaning on acquisitions to build capabilities and drive growth.
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