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Business News/ Market / Stock-market-news/  Brexit impact: Top 5 IT firms lost Rs50,000 crore market value in last two days
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Brexit impact: Top 5 IT firms lost Rs50,000 crore market value in last two days

TCS lost nearly `30,000 crore in market capitalisation, Infosys `12,000 crore, Wipro `3,420 crore, HCL `5,078.73 crore and Tech Mahindra `2,951 crore

On Monday, TCS fell 3%, Infosys 2.4%, Wipro 1.3%, HCL Tech 1% and Tech Mahindra 0.5%. The BSE IT Index fell 1.9% while India’s benchmark Sensex Index rose marginally by 0.02%. Photo: MintPremium
On Monday, TCS fell 3%, Infosys 2.4%, Wipro 1.3%, HCL Tech 1% and Tech Mahindra 0.5%. The BSE IT Index fell 1.9% while India’s benchmark Sensex Index rose marginally by 0.02%. Photo: Mint

Mumbai: India’s top five technology companies lost a combined 50,000 crore in market value in the two days since the British vote to leave the European Union on concerns of currency chaos in a region that earns a quarter of their revenue.

The British pound and euro have fallen since the vote and analysts say this will rub off on the company revenues as well.

Across Friday and Monday, TCS lost nearly 30,000 crore in market capitalisation, Infosys Ltd 12,000 crore, Wipro 3,420 crore, HCL Technologies Ltd 5,078.73 crore and Tech Mahindra 2,951 crore.

Local brokerages ShareKhan and Elara Securities expect stress on pound and euro to impact margins of IT companies.

The British currency tumbled 8.1% against the dollar to $1.3679 on Friday, which may lead to a revenue impact of 1.1% for TCS, 0.55% for Infosys, 1% for Wipro, 1.2% for HCL Technologies and 1% for Tech Mahindra, Sharekhan said.

Europe accounts for 23-29% of revenue of the top five Indian IT firms. In UK, TCS has an exposure of 15.8%, Infosys 6.6%, Wipro 11% and Tech Mahindra 10.8%.

“Brexit has resulted in a steep correction across the IT sector stocks, owing to fears of negative impact on business and the consequent earnings downgrades. We believe that there could be some impact on the earnings in FY2017/2018E from the event, but largely due to currency headwinds and not on account of business," said ShareKhan in a note to its investors.

“We will wait for more clarity from the IT companies’ management in the coming days to gauge the business impact from Brexit," it added.

Mint reported on Saturday that it’s too early to say how things will play out—for all one knows, Brexit could lead to increased outsourcing work. One thing’s for sure, though: the global economy is expected to be hit as a result of the UK’s decision to leave the EU, and this is bad news for all IT companies.

Nomura Financial Advisory and Securities Ltd in a report said India is still vulnerable as it has strong trade linkages with the rest of EU even as India’s trade with the UK is not as significant as other Asian economies.

“The UK’s share in India’s exports is just ~3.5%, but the rest of the EU accounts for ~13.5% of India’s exports. Furthermore, a growth slowdown in the rest of Asia would likely exacerbate the impact on Indian exports, which are already struggling in the current backdrop of weak global demand," Nomura said on 24 June.

The Japanese brokerage estimated that the UK accounts for a fair share of India’s exports of apparel (10%), footwear (17%) and machinery (5%) and is likely to be the worst hit. Weak exports will hurt business confidence, as capacity utilisation is already quite low in several sectors, Nomura said.

US investment bank Morgan Stanly highlighted that seven Indian companies out of 30 global ones are likely to underperform in the current environment as these companies have the highest revenue exposure to the UK and European Union. Names includes HCL Tech, Wipro, TCS, Infosys and Tech Mahindra. In addition, companies like Tata Motors and Godrej Consumer Products are also likely to be impacted, it said.

On Monday, TCS fell 3%, Infosys 2.4%, Wipro 1.3%, HCL Tech 1% and Tech Mahindra 0.5%. The BSE IT Index fell 1.9% while India’s benchmark Sensex Index rose marginally by 0.02%.

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Published: 27 Jun 2016, 05:43 PM IST
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