Bangalore: Shares in leading Indian outsourcers such as Infosys Technologies and Wipro fell on Thursday after one of their clients Nortel Networks Corp filed for bankruptcy.
Analysts said Nortel’s work contributed only a small portion of revenue for the outsourcers, but the news dealt another blow to the export-driven companies that have seen their growth slowing sharply as a global economic turmoil crimped demand.
By 12:48am shares in Infosys, India’s second-largest software services exporter, were down 5.2% at Rs1,237, after having fallen as much as 6.1%, in a Mumbai market down 3.5%.
No. 3 exporter Wipro was down about 5% at Rs231.80, after having shed as much as 10.5%, while the sector leader Tata Consultancy Services dropped 5.8% to Rs507.20.
North America’s biggest telephone equipment maker filed for credit protection on Wednesday hoping to save a once highflying business whose decade-long decline has accelerated with the global economic crisis. Analysts at JP Morgan wrote in a report that the Nortel move could “potentially impact” Tata Consultancy, Infosys and Wipro as they work with the telecom equipment maker.
As per Chapter 11 filing of Nortel, both Infosys and TCS have trade receivables worth $2.9 million each, while Wipro has receivable worth $3.1 million, JP Morgan said.
“Wipro could see business decline from Nortel, but we would expect the overall impact to be small. For Infosys and TCS, we believe the EPS impact would be even lower,” it said.
Officials at the Indian outsourcers were not immediately available for comment. “While Nortel bankruptcy itself should not have a significant impact on the financials of TCS, Infosys and Wipro, we believe it is a concern for the Indian IT sector as it reflects the weak health of the telecom OEM sector,” JP Morgan said, referring to original equipment manufacturers for telecom firms.
The brokerage said Wipro, with 10 percent exposure to telecom equipment makers, could be hurt more than TCS and Infosys.