Elliott Management, the activist hedge fund that changed Cognizant’s business strategy, has taken a tiny stake in WiproBSE 1.95 %, highlighting its interest in Indian IT companies. Of about 40 US-listed stocks that the $34-billion hedge fund owns, two are now from the Indian IT sector.
IT experts said the unprecedented disruption that the industry is going through makes it an attractive target and that there are three ways in which an activist could ask companies to improve shareholder value — by increasing margins as a result of cutting investment, overheads and sales costs; consolidation or accelerating the move to the digital model. “Option 1is by far the less risky and that is why it is favoured by the activist investors. Interestingly, the private equity community is increasingly interested in the industry and has already started to take positions in firms as well as taking them private. At this time the PE industry seems to be favouring options 2 and 3 and in some cases looking to combine them,” said Peter Bendor-Samuel, founder of Everest Research, an IT consultancy.
