New Delhi: Indian IT firms are unlikely to be hit by the US subprime lending crisis as their exposure to clients in the mortgage sector is limited, says a research by Citigroup.
Most Indian IT services companies have significant exposure to the banking and financial services industry. However, they have very few clients that are in the mortgage processing or subprime business, the report analysing the impact of subprime, or lending to people with poor credit history, on Indian IT services said.
“With all large caps clarifying that the exposure to the subprime segment is minimal, that is less than 1% of the revenues, we do not see any material impact on earnings or visibility,” Citigroup analysts Surendra Goyal and Hitesh Shah said.
Meanwhile, country’s second largest Business Process Outsourcing (BPO) firm, WNS Holdings Ltd, recently announced that one of its customers in the mortgage business, First Magnus Financial Corporation has ended its outsourcing contract.
Expecting the event to adversely impact its financial performance, New York Stock Exchange-listed WNS cut its guidance for the fiscal year 2008, since nearly five per cent of its revenues comes from US-based First Magnus. The mortgage lender has also filed for bankruptcy at US Bankruptcy Court in Tucson, after it was entangled in the current credit liquidity crunch affecting the mortgage industry.
However, Citigroup feels there is no need for extrapolating the WNS issue as IT companies have little to do with the subprime crisis and they are used to rotating people across projects which makes the impact negligible for the sector.