IT companies worried over European financial crisis
CHENNAI: When three big financial institutions from Europe sought government support on Monday, it deepened the worries of Indian IT companies, which had pinned their hopes on Europe to drive growth.
The main concern for IT firms is that Monday’s development could be a symptom of an impending slowdown in Europe, which contributes 20-30% of revenues of top six Indian IT companies.
In the past, these companies consciously tried to expand their European business to spread their risk. They did not want to put all their eggs in the US market, their biggest market. But troubles in Europe seem to be closely following those in the US.
“We are keenly observing the development in Europe, where we get 20% of our business. There is no information yet from our customers there, so we are in a wait-and-watch mode. But we feel the nationalisation of banks means that business will not go down since there will be some recapitalisation,” said Satyam Computer Services CFO Srinivas Vadlamani.
Last year, Satyam’s Europe business grew by more than 55%, which is higher than the company’s growth of 46%.
HCL Technologies global head of financial services Premkumar S added, “It would be inappropriate to say we are unconcerned.”
Other IT majors such as TCS, Wipro, Infosys and Cognizant declined to comment or respond to email questionnaire’s as they are in their mandated silent period ahead of their results announcements. All companies have been expanding their Europe business in the last few years.
Businesses typically go to different countries to diversify risk, assuming that different countries have different boom and bust cycles. So, when one country slows down, some other would drive its business.
On Monday while Belgian-Dutch banking and insurance group Fortis and British mortgage lender Bradford & Bingley came under government control, Germany’s commercial property lender Hypo Real Estate Bank pieced together a rescue package from a consortium of banks, backed with a government guarantee.
