Banking Crisis: Scary news for TCS, Infosys and HCL, 40% earning in danger! – double whammy for it sector credit suisse, svb collapse can impact indian it sector
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The banking crisis started in America. Silicon Valley Bank, which gave loans to startup companies, sank overnight. After this the number came of Signature Bank. This bank which gave loan to crypto companies also sat down. First Republic Bank is also counting its last breaths. According to a report, 186 banks in the US are on the verge of collapse due to rising interest rates. Shares of Credit Suisse in Europe fell 63 per cent as soon as the market opened on Monday. Shares of UBS, which is going to buy it, also fell 14 per cent in early trade.
Earnings can be hurt
The deteriorating condition of banks in America and Europe can have an impact on Indian IT companies as well. His earnings may be badly affected in the financial year 2024. Vineet Nair, IT veteran and former CEO of HCL Technologies, said it is difficult to predict what will happen next, but new projects will be affected by the uncertain environment. This will increase cost pressure. This will lead to increased outsourcing and renegotiation of existing contracts as well. With this, IT companies will increase the use of artificial intelligence so that their profits are not affected.
In view of this situation, analysts have reduced the earnings estimates of IT companies for the financial year 2024. Nomura analysts Abhishek Bhandari and Krish Beriwal said in a report that the performance of Indian IT companies in FY24 could be affected. When these companies announce their March quarter results, they will face tough questions from investors. Minister of State for IT Rajeev Chandrashekhar also admits that the revenue of IT companies may be affected but expressed hope that everything will be fine.
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Recently, a report by JP Morgan said that among the US banks facing financial crisis, the highest exposure is of India’s two big IT companies TCS and Infosys. Regional banks in America account for 2-3 per cent of their total revenue. TCS, Infosys and Mindtree have an exposure of 10-20 basis points to Silicon Valley Bank. Tata Group company TCS has the highest exposure in this. All three companies may have to make provisions for their exposure to Silicon Valley Bank.
According to the report, the sinking of SVB and Signature Bank and liquidity concerns in the US and Europe may lead to banks reducing their tech budgets in the short term. The country’s IT industry is already facing challenges from the macroeconomic environment in Europe and the US. Demand has come down due to the pandemic. For this reason, companies are reducing the expenditure on technology. The banking crisis could make the situation worse. Due to this, the revenue of IT companies may be affected in the next few quarters.
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