National, 22nd March 2023: Investment research firm Bernstein has downgraded the rating of Indian IT services company Wipro and its subsidiary L&T Technology Services (LTTS) due to concerns over the potential impact of budget cuts in the banking sector. The firm has maintained its positive outlook for Tata Consultancy Services (TCS), Infosys, Tech Mahindra, and HCL Technologies.
Bernstein analyst Chris Lane said that the banking sector in Europe and the US, which accounts for a significant portion of revenue for Wipro and LTTS, is likely to face budget cuts that could affect IT spending. Meanwhile, TCS, Infosys, Tech Mahindra, and HCL Technologies have diversified portfolios and are less exposed to the banking sector.
The report comes after the collapse of UK-based lender Greensill Capital, which has sparked concerns about the fallout in the banking sector. Bernstein has also noted that LTTS is facing increased competition in the engineering services space.
Despite the downgrade, Wipro and LTTS are still expected to deliver solid earnings growth, with Bernstein predicting a 10% increase in earnings per share for Wipro and a 17% increase for LTTS in the next fiscal year. However, the potential impact of budget cuts in the banking sector remains a concern for the two companies.