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Indian IT insulated from current geopolitical issues

ICICIdirect Research 10 Mar 2022 DISCLAIMER

What’s Buzzing:

Indian IT companies are insulated from the current geopolitical issues between Russia and Ukraine as none of the companies have any meaningful presence in these countries. Rupee depreciation may provide near term tailwinds in revenues while accelerated investments in cybersecurity cannot be ruled out.


Infosys had a subsidiary in Russia, which was liquidated effective January 2021 while TechM and Wipro have a presence in Ukraine and Russia, respectively, but not a very meaningful one. Other large companies have no presence in either Russia or Ukraine. Hence, Indian companies are insulated from the current geopolitical issues. Also, rupee depreciation against the dollar would provide tailwinds in revenues for the companies since they are export focused.

Our Perspective:

Europe is the second most important client geography for Indian IT companies as it contributes 20-25% of the overall business. However, it is important to note that ~85-90% of the Europe business comes from Western Europe whereas Eastern Europe did not have a major share and had lately turned out to be a key strategic delivery centre location where IT firms had started establishing their presence. As the conflict between Russia and Ukraine continues, Indian IT companies are in a wait and watch mode to consider taking strategic decisions, which may include shifting delivery locations from Eastern European countries like Belarus, Poland, Hungary, Czech Republic, Croatia, Latvia, Lithuania, Bulgaria and Slovakia to India, which is expected to provide some tailwinds in margins. Also, on account of the pandemic and work from home culture; investments in the cybersecurity space have gone up recently while further acceleration in investments in cybersecurity cannot be ruled out. The recent run up in major cyber security groups in the US indicates that demand for cybersecurity products may go up if the geopolitical battle between Russia and Ukraine shifts towards cyber-attack also.

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