India’s technology dealmaking environment saw fewer transactions taking place during the first quarter of 2026 even as overall deal values surged sharply, according to Grant Thornton Bharat’s Technology Dealtracker Q1 2026 report. Overall deal activity during Q1 2026 stood at 66 deals worth $3.4 billion, compared with 79 deals valued at $1.3 billion in Q3 2025.

“As we enter 2026, dealmaking environment in the Indian technology sector appears more measured and deliberate,” said Raja Lahiri, Partner and Technology Industry Leader at Grant Thornton Bharat LLP. “While deal volumes have softened, aggregate deal value has increased meaningfully. This reflects more than a temporary adjustment. It signals a structural shift in how capital is being deployed.”

The report noted that “the market is increasingly characterised by a concentration of capital into a narrow set of high-conviction opportunities,” adding that assets with credible GenAI capabilities, proprietary IP and scalable platforms are now commanding valuation premiums.

Q1 2026 marked the highest quarterly value recorded in the sector since Q3 2022, with total deal value rising 43% quarter-on-quarter despite an 8% decline in deal volumes. According to the report, two large-ticket transactions together contributed nearly $3 billion during the quarter, underlining the growing concentration of capital into high-value deals

M&A emerges as a massive contributor

M&A activity emerged as the biggest contributor to deal value during the quarter. The segment recorded 21 deals worth $2.6 billion, with values increasing more than threefold quarter-on-quarter. Outbound transactions alone contributed around $2.5 billion, or nearly 97% of total M&A value, reflecting continued appetite among Indian technology companies for cross-border acquisitions and capability-led expansion.

The biggest transaction during the quarter was Coforge’s acquisition of Encora Inc for $2.35 billion, which significantly lifted overall deal values. Other key transactions included Infosys’ investment in Stratus Global LLC, AMI Paradigm Solutions’ acquisition of L&T Technology Services’ smart world and communication business unit, and Black Box Ltd’s acquisition of 2S Inovações Tecnológicas.

The report said the widening gap between stable M&A volumes and surging M&A values “signals a market increasingly driven by strategic buyers rather than financial investors,” with companies focusing more on capability-led consolidation and long-term value creation.

PE activity remains flat

Private equity activity, meanwhile, moderated from previous peaks. PE/VC activity stood at 45 deals worth $848 million during the quarter, compared with 50 deals valued at $1.6 billion in Q4 2025.

The report said PE/VC investors continued to dominate overall volumes, accounting for nearly two-thirds of total deal activity, though deployment became more selective and skewed towards smaller ticket investments. Around 78% of PE transactions during the quarter were small-ticket deals.

A significant share of PE value came from Neysa Networks’ $600 million fundraise, which alone accounted for nearly 71% of total PE values during the quarter and helped the company achieve unicorn status.

Other notable PE transactions included Curql’s investment in Uptiq Inc, Vertex Ventures Southeast Asia & India and Fundamentum’s investment in Wishlink, Peak XV Partners’ investment in Agrani R&D India, and funding in Ringg AI by Arkam Ventures, Groww Founder Fund and Capital2B.

The report noted that early-stage innovation, particularly in AI and deep technology, continued attracting capital even as late-stage funding became more valuation-sensitive and selective. “The market is exhibiting a two-speed dynamic,” the report said, with early-stage AI-focused businesses continuing to raise capital while growth-stage funding slowed.

Technology services remained the largest contributor to deal value during the quarter, accounting for $2.6 billion across 14 M&A deals. The report said transformation in the segment was increasingly being driven through acquisitions rather than organic investments, as companies adapted to AI-led disruption, pricing pressures and evolving client demand models.

Enterprise software and SaaS, however, saw a slowdown in M&A activity. The segment recorded only one M&A deal in Q1 2026, with deal values falling to negligible levels. The report said buyers had become more selective amid valuation scrutiny and integration risks, while investors increasingly prioritised profitability, retention and product depth over aggressive expansion.

PE activity within enterprise SaaS remained relatively stable at nine deals worth $87 million, though the report noted that investors were increasingly favouring “vertical SaaS platforms with strong retention metrics and clear monetisation pathways.”

The report also highlighted increasing pressure on technology valuations globally amid concerns over the long-term impact of Generative AI on traditional IT services business models. “Valuation multiples of Indian IT services companies is trading well below their 5-year median due to concerns that AI is weakening the sector’s traditional labour-arbitrage business model,” said Manish Saxena, Partner, Deals Lifecycle at Grant Thornton Bharat LLP.