TCS, Infosys have highest exposure among US regional banks, says JP Morgan after SVB collapse

Top Indian information technology firms Tata Consultancy Services and Infosys have the most exposure among regional banks in the United States, which are grappling with financial turmoil, JP Morgan analysts said on Friday.

Regional banks in the United States account for 2-3 per cent of their revenue, JP Morgan said in a note, adding that the recently collapsed Silicon Valley bank risks 10-10% for TCS, Infosys and smaller rival LTIMIndtree. Could be 20 basis points. In which Tata group company is at the forefront.

JPMorgan said in a note that all three companies may need to set aside provisions in the fourth quarter because of their exposure to SVBs.

JP Morgan, which is “underweight”, said “the collapse of SVB, Signature Bank and liquidity concerns across the US and EU could reduce tech spending by banks in the short term to a year.” Rating on the field, 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 amid delays in deciding on long-term deals as demand slumps amid the pandemic. The reason has increased.

JPMorgan said the banking crisis could delay deal ramp-up, impact revenue conversion over the next two quarters and shut down new orders that could hurt revenue.

Indian IT companies derive a major chunk of their revenue from the banking, financial services and insurance (BFSI) sector.

JP Morgan said that within BFSI, their exposure to US banks is on an average 62 per cent and Europe is 23 per cent.

LTIMindtree said this week that it has negligible exposure to US regional banks, including SVB.

© Thomson Reuters 2023

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