A recent report by Moody’s Investors Service highlights the potential impact of the proposed Trump tariffs on Indian IT companies TCS and Infosys. The report suggests that the tariffs, currently in effect, may lead to a decline in the companies’ earnings and a negative shift in their credit profile.
As per the report, the proposed 10% import tariff on Indian IT products, including software, could lead to a 2-3% decline in revenue for TCS and Infosys. This reduction in revenue would affect the companies’ earnings, which could in turn negatively impact their credit profile. Moody’s has downgraded the outlook for both TCS and Infosys to “stable” from “positive”, citing the potential negative impact of the tariffs on the companies’ earnings.
The report notes that the tariffs could lead to increased costs for TCS and Infosys, particularly with respect to their American operations. The companies would need to bear the costs of adapting to the new tariffs, including adjusting their supply chain and logistics, which could result in increased expenses. This, in turn, could lead to a decline in their profitability and earnings.
Furthermore, the report suggests that the tariffs could also lead to a decline in business volumes for TCS and Infosys, as clients may delay or cancel their projects. This would result in reduced revenue for the companies, further exacerbating the negative impact on their earnings.
To mitigate the impact of the tariffs, Moody’s recommends that TCS and Infosys focus on diversifying their revenue streams, reducing their exposure to America and expanding their presence in other regions. The report suggests that the companies could also look to reduce their dependence on hardware and focus on higher-margin software services.
In conclusion, the proposed Trump tariffs present a significant challenge for TCS and Infosys. The tariffs could lead to a decline in revenue, decreased earnings, and a negative shift in their credit profile, according to Moody’s report. However, the companies can mitigate the impact by diversifying their revenue streams, reducing their exposure to America, and focusing on higher-margin software services.