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The prospects of Britain's exit from the European Union (EU) have come as a rude shock to Indian companies, as they are likely to face lower sales, increased cost of operations, immigration barriers for their employees and a fall in export earnings.
Among the biggest losers could be Tata Motors, whose subsidiary Jaguar Land Rover (JLR) sells 25 per cent of its products in Europe. Tata Steel Europe and auto parts maker, Motherson Sumi Systems, which sell make-in-UK products in the rest of Europe, may face trade barriers. Indian infotech companies could also lose income, as the British pound fell against the rupee by 7.5 per cent on Friday, which would reduce their export income.
Tata Steel earns almost 57.5 per cent of its revenues from Europe. Just before the vote, both Tata Steel Europe and JLR had cautioned their staff on how the EU is relevant for both companies.
"The EU is by far our largest export market, with over a third of our UK steel heading there... (and) access to that market is fundamental to our business," Tim Morris, head of public affairs at Tata Steel Europe, had said early this month. A Reuters report said the company will take a hit of £1 billion by 2020 due to Brexit.
Shares of TCS, Tata Motors, Tata Steel and Motherson, including other Indian companies with European exposure, fell on the BSE along with Sensex, which ended the volatile Friday with 2.24 per cent fall. Even as Indian companies brace for volatility, chief executive officers (CEOs) said it's business as usual for them. "I think we have seen a knee-jerk reaction today and there is huge job ahead to go out of Europe... As far as I am concerned, it will be business as usual and I do not see any changes, as England is still a part of the EU and does not cease to be because of a referendum," said Vivek Chaand Sehgal, chairman, Motherson Sumi.
CEOs of the information technology sector said the industry was gearing for another phase of uncertainty, as the UK accounted for over 20 per cent exports from India.
One of the worry is if European clients postpone their investment decision, which typically happens in such scenarios.
But IT CEOs played down the downside. "We do not see any cause for worry. The European market is the second-largest market for us in terms of revenue and the UK plays a key role within this market. In today's world, most businesses are connected to the global markets (and consumers) and given our customer portfolio; we see no specific downturns for our products or services," C P Gurnani, MD & CEO of Tech Mahindra, said.
On the pharma sector, analysts said barring Aurobindo, Brexit will have limited impact on pharma space. While Aurobindo gets 22 per cent of revenue from Europe, Torrent Pharma, Natco and Dr Reddy's get 10-11 per cent of revenues, for others it is lower than five per cent.
