Analysts attribute this to commercial flexibility, and client-centric solutions, which have turned out to be key differentiators for tier II firms in many deals. 

Despite a challenging macro environment, the trend of mid-caps outperforming large-caps is expected to persist in Q4FY25. While tier I IT companies will likely experience seasonal weakness and a decline in revenue, midcap IT firms are projected to deliver organic growth in the range of 2.8–5 per cent quarter-on-quarter (q-o-q) in constant currency (CC) terms. Analysts attribute this to commercial flexibility, and client-centric solutions, which have turned out to be key differentiators for tier II firms in many deals.

According to a Motilal Oswal Finacial Services (MOFSL) report, the previous downcycle showed mid-tier firms can thrive in cost-focused environments.

Cost-saving deals

In the last quarter of FY25, Coforge securing a $1.56 billion deal with US-based Sabre Corporation, a travel technology company, indicated mid-tiers have both the scale and the solution maturity to win cost-saving deals, the report observed.

According to a Nuvama Institutional Equities report, the top five IT firms are likely to report q-o-q decline, due to seasonalities, among other things. TCS may witness a -0.2 per cent CC q-o-q due to the BSNL ramp-down while Infosys and HCLT shall face seasonal weakness and experience q-o-q cc revenue degrowth of -1 per cent and -0.7 per cent respectively. Wipro and Tech Mahindra are likely to decline q-o-q due to company-specific challenges at -0.4 per cent and -0.7 per cent in cc terms.

In contrast, mid-caps like Persistent, Coforge, and Mphasis are all likely to report strong q-o-q growth of 3.8 per cent, 2.9 per cent and 2.8 per cent in cc terms.

Yugal Joshi, partner at Everest Group, shared that the mid-sized cohort, overall, will grow faster than their larger counterparts for FY25, with a difference of 100-200 bps.

Unique swim lanes

“Though not all mid-sized providers are doing better, their focus on client nearness and building specialised offerings has helped them. Unlike earlier times when their business mirrored larger providers, these mid-sized firms are now focusing on unique swim lanes at the intersection of technology, industry, region, and processes. Moreover, they are quick to focus on specific technology partners and scale their businesses around them. As the deal size and tenures become shorter, it is opening markets for these mid-sized providers which were out of reach earlier,” he explained.

Published on April 8, 2025