TCS and Infosys most exposed to US regional banks: report
India’s leading information technology firms Tata Consultancy Services and Infosys have the most exposure to regional U.S. banks that are in financial turmoil, JPMorgan analysts said on Friday.
Regional banks in the United States account for 2-3% of their revenues, JP Morgan said in a note, adding that exposure to the recently collapsed Silicon Valley Bank could be 10-20 basis points for TCS, Infosys and its smaller rival LTIMindtree, with the Tata Group company leading the way.
All three companies may need to take provisions in the fourth quarter due to their exposure to SVB, JP Morgan said in a note.
“The collapse of SVB, Signature Bank and liquidity concerns in the US and EU may further dampen near-term bank tech spending a year from now with slower growth in bank tech budgets” , said JP Morgan, which is “underweight”. note on the sector, said.
India’s IT industry is already facing a challenging macroeconomic environment in its key markets of Europe and the United States, where technology spending is contracting due to delays in decision-making on long-term deals as that the increase in demand caused by the pandemic has faded.
The banking crisis could delay deal ramp-up, impact revenue conversions in the next two quarters, and push back new order closures that could hurt revenue in the next four quarters, JP Morgan said.
Indian IT companies derive most of their revenue from the banking, financial services and insurance (BFSI) sector.
Within BFSI, their exposure to US banks averages 62% and Europe 23%, JP Morgan said.
LTIMindtree said this week that it has negligible exposure to US regional banks, including SVB.
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