Top Indian IT companies like Tata Consultancy Services Ltd. and Infosys have the greatest exposure to regional banks in the nation during the current financial crisis, according to analysts at JPMorgan on Friday.
According to a report from JPMorgan, regional banks in the US contribute 2–3% of their revenue. The business also stated that TCS, Infosys, and smaller rival LTIMindtree may have 10–20 basis points of exposure to the recently defunct Silicon Valley Bank, with the Tata Group company leading the pack.
Due to their exposure to SVB, all three businesses may need to set up provisions in the fourth quarter, according to a note from JPMorgan.
On Friday, a $30 billion lifeline for First Republic Bank calmed market concerns about a looming banking crisis.
Injecting the money into the San Francisco-based bank on Thursday, large US banks swooped in to save the lender beset by a growing crisis brought on by the failure of two other mid-size US lenders during the previous week.
US Treasury Secretary Janet Yellen stated that Americans can have faith in the security of their deposits since the US banking sector is still strong.
India's IT sector is already dealing with a difficult macroeconomic environment in its core markets of the United States and Europe, where technology spending is declining and long-term transactions are taking longer to be decided upon as the pandemic-driven demand surge recedes.
On Friday, market concerns about an impending banking collapse were allayed by a $30 billion lifeline for First Republic Bank.
According to JPMorgan, the banking crisis might postpone transaction ramp-ups, which would have an effect on revenue conversions over the following two quarters, and new order closures, which would have a negative impact on revenue over the following four quarters.
The banking, financial services, and insurance (BFSI) industry provides the majority of the revenue for Indian IT companies.
According to JPMorgan, the average BFSI exposure is 62% to US banks and 23% to European banks. This week, LTIMindtree claimed it had little exposure to US smaller banks, such SVB.