The indirect impact could come through the Indian IT sector's exposure to Europe and because of the movement in the euro-rupee exchange rates.
Large IT companies in India are likely to see a marginal 1-2 per cent earnings impact from the economic crisis in Greece due to their exposure to Europe, while their direct revenue exposure to Greece is ‘practically zero’, a research report said on Wednesday.
According to the global financial services firm, Bank of America Merrill Lynch, the indirect impact could come through the Indian IT sector's exposure to Europe and because of the movement in the euro-rupee exchange rates.
"While the direct revenue exposure of India IT to Greece is practically zero, there are linkages in the form of -- movement of euro versus Indian rupee and the spillover impact to growth outlook of other European countries to which India IT has business exposure," it said in a research note.
"In our view, a mild impact to Eurozone GDP and say, a 5 per cent depreciation of euro vs rupee results in only a small potential earnings impact for large-cap India IT (1-2 per cent)," Bank of America Merrill Lynch research Analyst Kunal Tayal said in the note.
The economic crisis in Greece has battered the stock markets globally, including in India, as foreign investors are looking to re-allocate their portfolios in the wake of weakness in the euro while the companies with direct exposure to Eurozone markets have been hit the hardest.
Greece's financial crisis has intensified, with Prime Minister Alexis Tsipras announcing capital controls and shutdown of banks, while the country has now defaulted on debt repayments to IMF -- becoming the first developed nation doing such a default.
As per the BofA-ML report, large Indian IT has predominant revenue exposure to the Nordics, Switzerland and Benelux within the continental Europe.
Germany and France are still relatively small markets (1-2 per cent of revenue), but are on a fast growth curve (especially Germany).
"A shock to gross domestic product outlook of the above sub-markets is what could potentially impact business, given such a scenario resulting in elongated IT sales cycles," BofA-ML said.
However, a mild impact on GDP outlook of these sub-markets is unlikely to result in any business impact for Indian IT as compelling cost savings of the global delivery model is a key driver of secular growth in continental Europe.
The report further noted that given the deflationary effect of global sourcing and employee restructuring costs, the India-centric vendors are better positioned than incumbent players.
Image: A man takes part in a anti-austerity pro-government demo in front of the parliament in Athens February 11, 2015. Photograph: Yannis Behrakis/Reuters