Helios Capital's Dinshaw Irani on why he prefers midcap IT stocks over largecaps

Helios Capital CEO Dinshaw S Irani has struck a cautious note on India’s large-cap IT pack, arguing that the recent correction in frontline technology stocks is not enough to justify fresh buying when the sector’s traditional revenue model itself is under pressure. His sharper takeaway: investors looking for technology exposure may be better off in small- and mid-cap IT names rather than the established services giants.

Large IT’s valuation trap

In an exclusive interview to BTTV, Irani said the apparent cheapness in large-cap IT stocks could be misleading because current valuations are often being judged against historical averages that may no longer be relevant. “The valuations may look screaming today, but that’s because you compare it to historic valuations. Historic valuations are not representative today,” he said.

That view reflects a deeper concern than just a cyclical slowdown. According to Irani, the issue is not merely whether artificial intelligence becomes a full-scale disruptor, but that growth visibility in the services business is already weakening. “Even if we are wrong on AI being a disruptor for this industry, you can look at the guidance. It’s obvious it’s hurting them somewhere,” he said.

Guidance cuts deepen concerns

Irani pointed to subdued sector growth and management commentary as evidence that the pressure is real. He noted that growth rates of 1-2 per cent are proving difficult to sustain and referenced Infosys cutting guidance to align with a roughly 1 per cent growth environment.

That matters because large-cap Indian IT has long commanded premium valuations on the back of predictable earnings, strong balance sheets and execution credibility. If revenue models are being reset by AI adoption, shorter deal cycles and slower discretionary spending, those premiums may face a structural rethink.

Why smaller tech firms may win

Where Irani turns constructive is in the small- and mid-cap IT universe. His argument is rooted in operating leverage: short-duration AI contracts may be too small to materially impact billion-dollar firms, but they can significantly lift growth for smaller companies.

“For them, a ten million contract in a hundred million revenue space makes a lot of difference. But for big guys who have billions of dollars in revenues, ten, twenty million doesn’t make any difference,” he said.