Credit Suisse crisis not to hit Indian IT
However, contagious effect on economy & sentiment on technology spend remain major concerns
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- BFSI is the largest vertical of all top-4 Indian IT firms
- It accounts for 30% of revenues
- Cognizant, Tech M, Wipro and other firms worked with Credit Suisse on various outsourcing projects
- However, the account size of the outsourcing contract is not big enough to impact
Bengaluru: Swiss banking major Credit Suisse's sharp fall in market cap amid fears of bankruptcy is not creating any shockwaves for Indian and global IT firms as its exposure to the banking major remains limited.
According to sources in the know, companies such as Cognizant, Tech Mahindra, Wipro and many others have worked with Credit Suisse on various outsourcing projects. However, the account size of the outsourcing contract is not big enough to impact any material impact on the business of any Indian IT firm. Credit Suisse also has its global capability centre (GCC) in Pune.
"There will not be any material impact of Credit Suisse incident. Though we don't know exactly what the fate of the bank will be, all indications are there that it remains strong. However, in case of a bankruptcy kind of situation, there will not be much impact on Indian technology firms as it doesn't come in the top 10 accounts of any company," said Pareekh Jain, an IT outsourcing advisor & founder, Pareekh Consulting.
Amid growing concerns over the financial health of Switzerland's second-biggest lender Credit Suisse, some commentators have started to draw parallel with the 2008-09 Lehman crisis. Share price of Credit Suisse has dropped by more than 50 per cent this year, raising fears of bankruptcy. The bank's credit default swaps (CDS), an instrument that measures the cost to insure its bonds, hit their highest levels since 2009. Credit Suisse is one of the biggest banks of Europe which had $1.6 trillion in assets under management in 2021. It provides wealth management, investment banking and asset management operations, besides being a domestic bank in Switzerland.
Credit Suisse has been assuring its staffers, clients and investors that its liquidity and capital position are strong. However, concerns remain over its ability to sustain the current economic environment.
"While Credit Suisse is not big enough to impact the balance sheet of Indian IT firms, it will spread the negative sentiment among the BFSI sector as far as technology spend is concerned in case the bank fails. That is the real worry apart from the contagious effect on the overall European economy," Jain said.
BFSI (banking, financial services and insurance) vertical is the largest vertical of all top four Indian IT firms which draw around 30 per cent of their revenues from this sector. Though banking sector players have done a lot of insourcing by managing their technology through inhouse centres, their engagement with global IT firms remains strong.
There will not be any material impact of Credit Suisse incident. Though we don't know exactly what the fate of the bank will be, all indications are there that it remains strong. However, in case of a bankruptcy kind of situation, there will not be much impact on Indian technology firms as it doesn't come in the top 10 accounts of any company
-- Pareekh Jain, an IT outsourcing advisor & founder, Pareekh Consulting
