Corporate Valuation in the Indian ITeS Sector

The post-global financial crisis outlook for the Indian information technology-enabled services (ITeS) sector is fraught with uncertainty. Several major information technology (IT) companies are in the process of corporate restructuring wherein their ITeS offshoots are being merged back with the parents. The motivation for this trend may be more strategic than financial in nature.Traditionally, enterprise valuation models are either asset-based, earnings-based, or a mixture of these. Assets-based valuation models focus on fixed assets or tangible assets as a source of value creation, while earnings-based valuation models focus on earnings/profitability and growth. For ITeS companies, however, human resources (intangible assets) would be expected to play a more important role in driving value than tangible assets.The present study proposes a model for enterprise value in the ITeS sector involving tangible assets, intangible assets (intellectual capital), and earnings/growth. In particular, the model would explain the relative impact of each of these factors on enterprise value