This US tech firm is now bigger than some Indian IT companies. Here's how

US technology services firm EPAM Systems has emerged bigger than LTIMindtree Ltd and grown faster than Tech Mahindra Ltd with a simple hack: doubling its employee strength in India.

EPAM’s business had nearly come to a standstill because of the Russia-Ukraine conflict that began in February 2022, as a third of the company's workforce was in war-torn countries. Since then, though, the American technology services firm has almost doubled its employee presence in India, making the country its second-largest employee base.

This has allowed EPAM to retain its client base and regain growth.

EPAM, which follows a January-December fiscal year, closed the September quarter with $1.17 billion in revenue, achieving a compounded quarterly growth rate of 0.48% between 31 December 2021 and 31 September 2024, according to a review by Mint.

In this period, Tech Mahindra, India’s fifth-largest information technology services provider by revenue, recorded a growth rate of 0.32%, reaching a revenue of $1.6 billion at the end of July-September 2024 period. LTIMindtree, India’s sixth-largest IT services firm, grew at 1.87%, reaching $1.1 billion in revenue at the end of the three months through September 2024.

EPAM has also improved its operating margin, from 15% in December 2021 to 15.2% at the end of September 2024.

To be sure, Tech Mahindra and LTIMindtree had their own set of challenges. Last year, Tech Mahindra reported a full-year revenue decline even as it appointed former Infosys Ltd executive Mohit Joshi as its chief executive. Joshi has rolled out a three-year roadmap to shore up the company’s operating margin from less than 10% at the end of September quarter to 15% by the end of FY27.

Also Read: Tech Mahindra saw a gradual revival in Q2, but will this continue?

LTI Mindtree, the result of Larsen & Toubro Infotech Ltd merging with Mindtree Ltd in November 2022, saw a string of senior management departures and faced cultural challenges that firms tend to see during a merger. Consequently, the company has grown slower over the last four quarters than the growth reported by the two companies before the merger.

India headcount

EPAM, which was founded in 1993 and went public in 2012, had about 36% of its 58,824 employees in Ukraine and Russia in the year ended December 2021. In India, it had 4,349 employees, or 7.4% of its workforce then.

As Russia started its campaign to invade Ukraine on 24 February 2022—a conflict that continues to this day—EPAM’s management was forced to relook at its business, including getting its people out of the conflict areas.

In the week after the war started, EPAM, which is listed on the New York Stock Exchange, saw its share price tumble by half to $198 each. Also, the company had to withdraw its revenue guidance for the year.

Its fortunes have turned since.

At the end of December last year, EPAM had 7,050 employees, or 13.3% of its 53,150 workforce, in India. Ukraine, home to 17% of its workforce, remains its largest, but the company’s workforce there has shrunk from 12,389 employees at the end of 2021 to 9,113. In Russia, where EPAM had nearly 9,000 employees two years ago, it has no business or employees there at present.

“EPAM started with a strong focus on software product development and digital engineering, with the emphasis on consult and build services. Their talent base has deep engineering capability which traditionally commanded premium pricing," said Ramkumar Ramamoorthy, partner at Catalincs, a Chennai-based growth advisory firm.

Analysts at Piper Sandler & Co wrote in a note dated 23 October that the company's employee presence in India is now nearing 15% of its workforce.

“EPAM has significantly reshaped its headcount since the start of the Ukraine/Russia war. It has reduced headcount in Ukraine/Belarus and Russia to 27% of headcount from about 59% at the end of FY21; while India headcount has increased to 15%; from 8% during the same time period," Piper Sandler analysts Arvind Ramnani and John Nutt wrote. 

Also Read: IT companies' revenue revival seen delayed to FY26

Another focus area for EPAM during the last few years has been acquisitions. Two of its acquisitions, Neoris and First Derivative, are estimated to bring about 11% of EPAM's revenue in 2024, according to analysts at Piper Sandler & Co.

"The company is investing in the buildout of "full-service GenAI delivery practices through a network of GenAI labs in rapidly expanding geospatial such as LatAm and India," wrote Ramnani and Nutt.

The market reaction to EPAM’s operational shift and expansion plans has been positive. Despite seeing its stock price drop to $198 apiece shortly after the war began, EPAM's share has rebounded 17.6%. Meanwhile, shares of Tech Mahindra, despite the company's underperformance, have returned 18% during this time, while LTIMindtree, which started trading on the BSE on 24 November 2022, has returned 39%.