Auto stocks bore the brunt of the Brexit impact losing nearly 10% of their value. Tata Motors which gets about a quarter of its volumes from the UK was among the worst affected as was auto component supplier Motherson Sumi which supplies parts to a number of luxury car makers.
While JLR sources about 40% of its parts from the EU, costlier imports on higher duties will make exports uncompetitive. However, the positive would be a weaker pound which could offset some impact.
Motherson sources its parts from across the globe though both its subsidiaries accounting for over 80% of revenues are based in Netherlands. While sourcing of raw material happen in local currency, the impact either way could be on currency translation.
The other two auto companies with a major exposure to Europe are Bharat Forge at 39% and Apollo Tyres getting about 30% of revenues from Europe.
The key issue is the impact on Europe from Brexit if it leads to fall in auto sales. That will have a major impact on the key auto stocks and those that have plants in multiple locations.
Barring Aurobindo, Brexit will have limited impact on pharma space.While Aurobindo gets 22% of revenue from Europe, Torrent Pharma, Natco and Dr Reddy’s get 10-11% or more of revenues, for others it is lower than 5%. For these companies the impact could be 1-2%. Euro based costs are an offsetting factor.
Tata Steel could see some impact given UK accounts for 25-30% Tata Steel’s Europe volumes and part of this is exported to Europe which could face higher tarriffs.