Written by 12:20 am Europe Economy

Investors: European business chill may hurt Indian companies, too

Mumbai: Investors could cut exposure to shares of companies in software services, chemicals auto components, jewellery, and engineering sectors that derive a chunk of their revenues from exports to Europe, mainly the United Kingdom, said analysts.

With the British pound tumbling to its all-time low against the US dollar amid a gloomy outlook for Europe, analysts expect the earnings of companies with business interests in the region to be 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 though their revenues are from Europe.

European Business Chill may Hurt Indian Cos, too

“The export-related sectors like gems and jewellery, engineering, and IT services are likely to see an impact due to subdued demand from Europe,” said Sandeep Bhardwaj, CEO-Retail, . “The rupee has appreciated against the pound while depreciating against the dollar. Hence, the IT companies which export more to the European countries have faced high volatility due to the dual impact of rupee appreciation leading to lower value per order and lower demand due to clients postponing IT upgrades.”

On average, auto ancillary companies derive 16% to 58% of their revenues from Europe, while capital goods companies have 16% to 46% exposure to the region. The exposure of chemical companies is 15% to 48%, IT services have 16% to 51% and pharma companies have 18% to 84% exposure. A few IT companies like Mastek derive more than 60% of their revenue from the UK.

Some stocks such as Tata Motors,

, Mastek, and UPL have declined 10-15% in the last month compared to the 3% fall in the Nifty.

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