In a report titled “Brexit: Impact on Indian Cos”, Axis Capital has put out a list of 16 companies that have significant exposure to the Eurozone including the United Kingdom. These include seven companies which have assets in Europe and nine others which export to Europe.
Axis said while it was difficult to determine immediate term effect of risk-off( US dollar appreciation vs all other currencies) against longer term impact of fall in revenues to Euro-areas, UK might have to renegotiate all trade agreements with individual countries.
“Hence for each of the 16 companies with significant % revenues from Euro Zone, this benchmark is not the most important factor,” the report by Axis analysts Nandan Chakraborty and Sachidanand Shukla said adding, “Largely of these companies, negative impact is likely to be more on Auto and ancillaries and Tata Steel with operations in Europe(especially as greater GBP/Euro competitivenees cannot translate to greater volumes if global growth is to suffer from Brexit) versus IT/pharma exporters whose effect may be partially offset by dollar appreciation in immediate term.
The EU can probably take Brexit on the chin and survive, but not if this exit leads to a contagion of other Euro member exits, the Axis analysts added. “A risk-off trade will get triggered, leading to a rally in US dollar versus Euro and GBP , and capital outflows from India.