 "TCS")
With Britain voting to exit the European Union (EU), the Indian information technology (IT) services sector braces for uncertainty for at least a while.
The United Kingdom is the second largest IT spending country in the world after the US, accounting for a little over a fifth of overall IT services export from India. Most of the large Indian IT service companies — Tata Consultancy Services, Tech Mahindra, HCL Technologies, Infosys — have a strong presence there.
Companies using Britain as their main base for serving other European countries will have to start establishing a local presence in the latter. This does not make much economic sense, due to the scale of the business from those countries.
The major shock would come from a depreciating pound, now down to almost 1985-levels. That means Indian IT firms earning higher revenue in pounds will take a hit. Experts say among the top three, TCS and Wipro have relatively higher exposure to the pound, as both derive around 14 per cent of revenue each from that currency. Infosys’ revenue from the pound was 6.6 per cent in FY16, though Europe as a market accounts for 23 per cent of its overall revenue.
“While currency will be an immediate concern area, that is not that big a concern in the longer term as the economic and political instability in the entire region is,” said a top executive of a large Indian IT services entity, requesting anonymity. “A larger impact would be if the European clients postpone their investment decision, typical in such scenarios. Obviously, they will not take any decision till the dust settles.”
“Wipro watches with deep interest the unfolding developments in the UK and its potential impact on a host of factors, including mobility of labour, changes in the financial system and the currency,” the Bengaluru-based company said. Wipro has been present in the UK for over two decades and employs a little over 4,000 people there.
Apart from TCS, other Indian companies expected to take a hit due to the Brexit decision are HCL Technologies and Tech Mahindra. They also have a relatively higher degree of exposure to the region. About 31 per cent of HCL’s total revenue comes from Europe.
The United Kingdom is the second largest IT spending country in the world after the US, accounting for a little over a fifth of overall IT services export from India. Most of the large Indian IT service companies — Tata Consultancy Services, Tech Mahindra, HCL Technologies, Infosys — have a strong presence there.
Companies using Britain as their main base for serving other European countries will have to start establishing a local presence in the latter. This does not make much economic sense, due to the scale of the business from those countries.
The major shock would come from a depreciating pound, now down to almost 1985-levels. That means Indian IT firms earning higher revenue in pounds will take a hit. Experts say among the top three, TCS and Wipro have relatively higher exposure to the pound, as both derive around 14 per cent of revenue each from that currency. Infosys’ revenue from the pound was 6.6 per cent in FY16, though Europe as a market accounts for 23 per cent of its overall revenue.
“While currency will be an immediate concern area, that is not that big a concern in the longer term as the economic and political instability in the entire region is,” said a top executive of a large Indian IT services entity, requesting anonymity. “A larger impact would be if the European clients postpone their investment decision, typical in such scenarios. Obviously, they will not take any decision till the dust settles.”
“Wipro watches with deep interest the unfolding developments in the UK and its potential impact on a host of factors, including mobility of labour, changes in the financial system and the currency,” the Bengaluru-based company said. Wipro has been present in the UK for over two decades and employs a little over 4,000 people there.
Apart from TCS, other Indian companies expected to take a hit due to the Brexit decision are HCL Technologies and Tech Mahindra. They also have a relatively higher degree of exposure to the region. About 31 per cent of HCL’s total revenue comes from Europe.
