Banking crisis in US to impact IT services industry in India

New Delhi: Indian IT services industry is likely to get impacted following the crisis in US and European banking.

A survey pointed out that the FY24 growth of India’s IT services industry, which counts banking financial services and insurance (BFSI) as its largest customer base and according to Nasscom, brought 41 per cent of its revenue in FY23.
Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Mphasis, LTIMindtree (LTIM) are among Indian IT firms that have exposure to some troubled banks.

TCS has exposure to USA’s Silicon Valley Bank (SVB), Credit Suisse and UBS, which has agreed to take over the Swiss bank.

“We estimate SVB exposure is 10-20bps for TCS, Infosys and LTIM that may lead to a provision in 4Q23. While this has driven a correction and taken multiples down by 0.5-1SDs, estimates don’t factor in the increased EPS risk from any further slowdown in spending,” said a JP Morgan report.

In the medium-term, IT firms will have to provision for the impact of these troubled banks. The long-term could be a scenario that emerged after the Lehman crisis in 2008 when banks focused on costs and business projects, benefiting the IT sector.

Medium to short term will be a difficult period for the sector, as the banking crisis will impact deal flows.

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