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US, Europe banking woes may impact Indian IT firms; TCS, Infosys, Wipro
According to JP Morgan reports, US and European banks are currently facing a financial crisis. And this will adversely affect India’s two big IT companies Tata Consultancy Services (TCS) and Infosys.
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The reports suggested that the regional banks in the US account for 2-3 percent of their total revenue. However, TCS, Infosys, and Mindtree may have an exposure of 10-20 basis points to the recently sunken Silicon Valley Bank.
“We expected a growth slowdown in FY2024 to play out in the form of a weak March 2023 quarter, followed by a moderate uptick in Q1FY24 and normalization in Q2FY24. Current woes in the banking sector can impact sequential growth by 1-2 per cent in Q1FY24,” said a note from Kotak Institutional Equities.
The Tata Group company TCS will have the highest exposure among all. Additionally, the US banking, financial services, and insurance (BFSI) sectors are a key revenue segment for top Indian IT companies. The exposure to this sector is on an average of 62 percent in US banks and 23 percent in Europe.
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Indian IT players like Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Mphasis, and LTIMindtree have exposure to some of the troubled banks.
Additionally, in a discussion with business today Vijay Chopra, MD and CEO of Enoch Intermediaries, said, “Right now the Indian IT sector is vulnerable.”
“BFSI contributes to a large extent to IT companies’ revenues. The outlook right now is very conservative, I would not recommend buying IT right now as they are already facing headwinds”, Vijay Chopra added.
Economic Times also reported that the banking crisis could affect tech spending in India, affecting major IT firms like TCS, Infosys, Wipro, and LTIMindtree, since they are majorly involved with US regional banks.
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The IT services sector in India may have to bear the brunt of the banking sector crisis in the US and Europe, which may affect their FY24
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About the Author
Sheenu Pradhan
Contributing Writer