The US and European banks are currently facing a financial crisis. This will adversely affect India’s many IT services companies including Tata Consultancy Services (TCS), Wipro, HCL, and Infosys.
The reports suggested that the regional banks in the US account for 2-3 percent of their total revenue. However, TCS, Infosys, and Mindtree may have an exposure of 10-20 basis points to the recently sunken Silicon Valley Bank.
Additionally, the US banking, financial services, and insurance (BFSI) sectors are a key revenue segment for top Indian IT companies. The exposure to this sector is on an average of 62 percent in US banks and 23 percent in Europe.
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Indian IT players like Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Mphasis, and LTIMindtree have exposure to some of the troubled banks.
Additionally, in a discussion, Vijay Chopra, MD and CEO of Enoch Intermediaries said, “Right now the Indian IT sector is vulnerable.”
“BFSI contributes to a large extent to IT companies’ revenues. The outlook right now is very conservative, I would not recommend buying IT right now as they are already facing headwinds”, Vijay Chopra added.
According to the reports of Mint, IT companies in India may reduce their workforce in the banking and finance sector by 5-7 percent.
The impact not only be on layoff but will be seen on new hiring from the campus, Involuntary attrition, and salary increase of the existing employees.
It is also expected that the Involuntary attrition to go up by 5-7 percentage points in the next three months. Additionally, the campus hiring will be in a lesser number. The expected salary hikes will be slightly lower.
The report further suggests that IT companies including TCS, Infosys, Wipro, and HCL Tech are still facing high employee costs, despite a decline in overall headcount.
The reports of Mint further suggested that there has been a sequential drop (56.2% in the September quarter to 55.1% in the December quarter), and wage costs as a share of revenue are still higher than in the same quarter a year ago.
It is expected that the impact can be seen in the next two quarters and they will be very choppy. Accenture has announced it lay off 19,000 people globally which is 2.5% of its global workforce in the next 18 months.
Accenture in India has over 3,00,00 employees, and according to media reports, layoffs in Accenture in India may impact around 7000 employees. However, these numbers may vary depending on Accenture’s business performance in India.
