Leading Indian information technology firms Tata Consultancy Services and Infosys have the highest exposure to regional banks in the US being hit by the financial turmoil, analysts at JP Morgan said Friday.
Regional banks in the United States account for 2-3% of their revenue, JP Morgan said in a note, adding that the level of risk to the recently collapsed Silicon Valley Bank could be 10-20 basis points for TCS, Infosys and smaller competitor LTIMindtree, led by the Tata group company.
All three companies may need to make provisions in the fourth quarter due to exposure to SVBJP Morgan said in a note.
“The collapse of SVB, Signature Bank, and liquidity concerns across the US and the European Union could reduce banks’ technology spending in the short term of a year at an accelerating rate.” banking technology budget growth slows down,” said JP Morgan, which is “underweight” in its assessment of the sector.
India’s IT industry is facing a challenging macroeconomic environment in key markets of Europe and the US, where technology spending is shrinking due to delays. in decision-making on long-term deals as the increased demand caused by the pandemic has waned.
JP Morgan said the banking crisis could delay an increase in transactions, affect revenue conversion for the next two quarters and push back new order closures that could affect revenue for the next four quarters. .
Indian IT companies derive most of their revenue from the banking, financial services and insurance (BFSI) sectors.
In BFSI, their exposure to US banks averaged 62% and European banks 23%, JP Morgan said.
LTIMindtree this week said it has negligible exposure to US regional banks, including SVB.
© Thomson Reuters 2023
