US-EUROPE BANKING WOES MAY HIT INDIAN IT FIRMS' GROWTH PATH

The IT services sector in India may have to bear the brunt of the banking sector crisis in the US and Europe, which may affect their FY24 growth momentum. The industry counts banking, financial services, and insurance (BFSI) as its largest customer base. According to Nasscom, BFSI constituted 41 per cent of the industry's revenue in FY23.

- SHIVANI SHINDE

Indian IT players like Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Mphasis, and LTIMindtree have exposure to some of the troubled banks.

"We expected a growth slowdown in FY2024 to play out in the form of a weak March 2023 quarter, followed by a moderate uptick in 1QFY24 and normalisation in 2QFY24. Current woes in the banking sector can impact sequential growth by 1-2 per cent in 1QFY24," said a note from Kotak Institutional Equities.

The note further stat that its current growth forecast for leaders-FY2024E -- stood at 8 per cent, which may be cut short by 1-2 percentage points due to the current crisis.

For instance, TCS has exposure to Silicon Valley Bank (SVB), Credit Suisse, and UBS. "We estimate SVB exposure is 10-20 bps for TCS, Infosys and LTIM that may lead to a provision in 4Q23.