With the British pound falling to its all-time low against the US dollar amid a bleak outlook for Europe, analysts expect earnings at companies with business interests in the region will come under pressure.
companies like
, , , , , , and Tata Consumer derived 10% to 68% of their revenues from the UK in FY22. Most of these companies are paid in US dollars, although their revenue comes from Europe.
“The export-related sectors such as gems and jewellery, engineering and IT services are likely to see an impact due to subdued demand from Europe,” said Sandeep Bhardwaj, CEO of Retail. “The rupee has appreciated against the pound while depreciating against the dollar. Therefore, the IT companies exporting more to the European countries have faced high volatility as the appreciation of the rupee has resulted in a lower value per order and less demand from customers, which has led to the postponement of IT upgrades.”
On average, automotive supply companies generate 16% to 58% of their sales in Europe, while capital goods companies have 16% to 46% exposure to the region. The share of chemical companies is 15% to 48%, IT services 16% to 51% and pharmaceutical companies 18% to 84%. A few IT companies like Mastek generate more than 60% of their turnover in the UK.
Some stocks like Tata Motors,
Mastek and UPL are down 10-15% over the last month compared to the Nifty’s 3% decline.
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