Indian information technology firms Tata Consultancy Services and Infosys are among the most affected regional banks in the U.S., analysts at JPMorgan said on Friday.
Regional banks in the United States account for 2-3% of their revenues, with JP Morgan saying in a note that the impact of the recently collapsed Silicon Valley bank could be 10-20 basis points for TCS, Infosys and smaller rival LTIMindtree. Led by the Tata Group.
All three companies may have to write off provisions in the fourth quarter because of their exposure to SVB, JP Morgan said in a note.
“The collapse of SVB, Signature Bank and liquidity concerns in the US and EU could further dampen banks’ technology spending in the short-term over the year, with slower growth in banks’ technology budgets,” said JP Morgan, an “underweight” . rating by sector, he said.
India’s IT industry is facing a challenging macroeconomic environment in its key markets of Europe and the United States, where technology spending is shrinking amid long-term deal-making delays due to pandemic-related demand surges.
The banking crisis could affect revenue conversion in the next two quarters and delay the closing of new orders, which could hurt earnings in the next four quarters, JP Morgan said.
Indian IT firms derive the bulk of their revenue from the banking, financial services and insurance (BFSI) sector.
Under BFSI, their exposure to US banks averages 62% and Europe 23%, JP Morgan said.
LTImindtree said this week that regional US banks, including SVB, will be impacted insignificantly.
(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)