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Dolat Capital Report
Dolat Capital noted that valuations across IT services have corrected meaningfully over the past three months.
According to the brokerage, tier‑1 IT services companies are now trading at 15–20x FY28E earnings, while tier‑2 players, including ER&D and KPO firms under its coverage, are valued in the 15–30x earnings range.
The brokerage believes current market pricing already factors in a moderate growth environment, with a gradual uptick expected from AI‑led spending, thereby limiting downside risks from current levels. However, the market narrative has clearly shifted towards selective vendors, particularly those demonstrating executionled growth.
As a result, the brokerage expects a more polarized valuation landscape going forward. Market leaders have demonstrated strong growth despite moderate underlying Tech spends, supported by strong deal pipelines commentary, AI capabilities, and consistent execution, that are likely to command higher investor attention and premium valuation.
Over FY21-26E, global IT spend (Gartner: ~9.9%) and Indian IT services exports (Nasscom: ~10%) have tracked closely, indicating limited aggregate market share gains for the industry. This reinforces that sector growth has largely mirrored underlying demand rather than structurally outpacing it.
However, the dispersion at the company level remains meaningful. Mid-tier players such as LTMindrtree, Coforge, Persistent Systems, KPIT and eClerx have delivered materially higher growth (17–25% CAGR), significantly outperforming industry benchmarks.
This highlights a shift toward execution led differentiation, where niche positioning, consistent deal wins, and deeper vertical focus are driving disproportionate growth.
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