homebusiness Newscompanies NewsHow does the SVB collapse pose challenges for Midcap IT names like Coforge, Mphasis
business | Mar 14, 2023 2:07 PM IST

How does the SVB collapse pose challenges for Midcap IT names like Coforge, Mphasis

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Mphasis has exposure to First Republic Bank, whose shares fell 62 percent on Monday and are down nearly 80 percent over the last week.

The SVB collapse and the subsequent fall seen in global banks may lead to some of the major banking clients rejigging their IT expenses. The BFSI segment which contributes nearly 30-35 percent of the total revenue of Indian IT services, is expected to face the cost-cutting brunt.

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The spill-over impact of SVB is not yet felt in larger US banks which form bulk of the revenue for the Indian IT heavyweights like TCS, Infosys, HCL Tech and others. Midcap IT names though are exposed to names like Fifth Third Bank and First Republic Bank that have come under tremendous pressure in the last few sessions.
As per a brokerage note, Coforge has exposure to a regional bank like Fifth Third Bank, whose shares fell over 13.5 percent on Monday and have declined nearly 30 percent over the last week.
Mphasis has exposure to First Republic Bank, whose shares fell 62 percent on Monday and are down nearly 80 percent over the last week.
Analysts say that the SVB episode will be a reason for concern even if does not cause any systemic risk. The recent developments may lead to banking clients procrastinating on IT spending decisions, given the capital constraints. The budget cycle of calendar year 2023 may also be delayed.
This would result in longer sale cycles which would in all probability, impact the sector’s near-term visibility.
Shares of Coforge are trading 4.5 percent lower at Rs 3,900, while those of Mphasis are trading 3.6 percent lower at Rs 1,891.90.
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