J.P. Morgan analysts warned Friday that Tata Consultancy Services (TCS.NS) and Infosys (INFY.NS) have the most exposure to U.S. regional banks amid financial upheaval.
In a note, J.P. Morgan said regional U.S. banks account for 2-3% of their revenue and that TCS, Infosys, and LTIMindtree (LTIM.NS) might be exposed to the failed Silicon Valley Bank by 10-20 basis points, with the Tata group business leading.
J.P. Morgan warned in a report that SVB exposure might need fourth-quarter provisions for all three businesses.
“The collapse of SVB, Signature Bank and worries about liquidity across U.S. and the European Union might further reduce tech spending by banks over the short term in a year with slowing growth in bank tech budgets,” J.P. Morgan, which rates the sector “underweight,” said.
India’s I.T. industry is already confronting a difficult macroeconomic climate in its core markets of Europe, and the U.S. Technology investment is declining. Moreover, long-term deal-making is delayed as the pandemic-led demand boom subsides.
J.P. Morgan warned the banking crisis might delay deal ramp-ups and new order closing, hurting revenue over the next two and four quarters.
BFSI is the biggest income source for Indian I.T. businesses.
J.P. Morgan reported that BFSI has 62% U.S. bank exposure and 23% European.
Last week, LTIMindtree reported low exposure to U.S. regional banks, including SVB.