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Lehman brothers has filed for Chapter 11 bankruptcy after Barclays and Bank of America abandoned talks to buy the company. Following the news, the IT space felt a fair bit of pressure. With Lehman Brothers filing for bankruptcy and Bank of America taking over Merrill Lynch; the key question would be - do these companies have significant exposure to the Banking, Financial Services and Insurance (BFSI) space and what would be the impact?
Lehman Brothers, which has filed for bankruptcy, seems to have very little outsourcing done as of now and the exposure remains with Wipro and Tata Consultancy Services (TCS). Wipro has given a statement that Lehman Brothers is not such a significant client and they are not worried about it. Extrapolating what Wipro has said, TCS may not see much of the impact.
But one needs to watch out for what happens with Merrill Lynch because Merrill Lynch was a significant client for both Satyam and TCS. The one which is going to suffer from Merrill Lynch’s takeover is going to be Satyam because it was a significant top client for them. Where TCS gains over Satyam is it has in relationship with the acquiring company Bank of America, which gets more outsourced work. Infosys and Bank of America have a very steady relationship. So Infosys maybe one of the gainers.
S Mahalingam, CFO, TCS has said that the company has a very steady-state relationship with both Merrill Lynch and Bank of America. So he is expecting no impact coming from this part of work at least.
HCL Technologies has done a little bit of work for Lehman Brothers but the management has clarified that it is over and they are not going to be impacted by it. EDS does a lot of work for Bank of America globally. So one needs to wait and watch of what kind of shape this takes and whether any work pours down to Mphasis.
When one puts all of this together, there is some loss but given that most of our top five companies have over 40-45% exposure to BFSI space, then mood is worried and concerned right now. Everybody is calling their relationship manager and trying to figure out what is happening officially because normally there is a two-three months' time, by when the impact actually flows down to the offshoring vendors.
Source: - IndiaEarnings

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