He expects cumulative earnings-per-share (EPS) growth of around 70% over three years and believes this potential upside does not require any further expansion in valuation multiples.
Agarwal’s optimism is driven by the expected acceleration in enterprise AI adoption. He believes the IT sector could see a period of strong growth over the next 6–12 months, similar to the post-COVID recovery. “I feel that enterprise AI is now opening up in a mad way,” he said, adding that companies are likely to see strong demand as their available workforce and bench strength remain limited.
His confidence in the sector is also reflected in his portfolio positioning. Agarwal said his IT allocation was zero until March 15 but has since increased to more than 20%, with scope to raise it further. He expects most IT companies to benefit from the recovery, although he remains cautious on some research and development (R&D) focused names trading at very high valuations.
Against this backdrop, Agarwal believes the Happiest Minds Technologies-ITC Infotech transaction could ultimately benefit ITC Infotech significantly. He sees ITC Infotech as a major winner because the deal is being done without a premium and gives the unlisted company access to a listed platform and greater scale.
For Happiest Minds shareholders, however, Agarwal’s broader message is that the sector outlook matters more than the immediate structure of the transaction. He expects shareholders holding IT stocks to benefit as the sector recovers. “Anyone is holding any IT stock, they will be big beneficiary next few months,” he said.
The combined entity, which could reach around $1 billion in revenue in about a year and a half, could also benefit from greater scale. Agarwal believes larger companies have an advantage when competing for large deals and can command better valuations. He pointed to past transactions such as LTIMindtree as examples of how smaller companies can benefit from becoming part of a larger platform.
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Agarwal’s overall view is that the IT sector may be emerging from a prolonged period of weak valuations and subdued expectations. “Another 50% in IT index in next two years is minimum,” he said, while maintaining that the sector’s potential gains can come primarily from earnings growth rather than a rerating of valuations.
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