Tata Group stocks hardest hit by Brexit, company loses Rs 30,00 crore in a day

The Tata Group, one of the biggest foreign investors and employers in the UK, is reviewing its strategy and operations in the island country following Britain voting to withdraw from the European Union (EU) even as nervous investors dumped shares of its companies on the Indian bourses.

Shares of Tata Motors, Tata Steel and TCS were down 8%, 6% and 3% respectively in a weak Indian market on Friday, making the group lose Rs 30,000 crore in a single day n market capitalization.

The salt-to-software giant currently has 19 companies operating in the UK, employing over 60,000 people.


The group's automotive unit in the UK, Jaguar Land Rover (JLR), itself will take a hit of $1.47 billion in the next four years owing to a 10% levy on vehicles sold in EU nations and 4% on imports of components.

Tata Steel's UK unit sale too could suffer a setback with a change in government. The David Cameron government had committed to take a 25% stake in the beleaguered unit while also offering hundreds of millions of pounds as financial support.

The Indian conglomerate entered the UK in 1907 and since 2000, through marquee acquisitions such as Tetley, JLR, Corus (Tata Steel UK), St James Court Hotel, Brunner Mond, among others, it has built a significant presence in the British country "Each company continuously reviews its strategy and operations in the light of developments, and will continue to do so. Access to markets and to a skilled workforce will remain important considerations," said Tata Sons, the holding company of the $109 billion group.

The diversified enterprise's biggest revenue generating unit in the UK is JLR, followed by TCS.

UK is the second largest contributor (nearly 16%) to the revenues of the software giant, which employs more than 11,000 people.

JLR, which was acquired in 2008, contributes nearly 90% to Tata Motors profits.

JLR derives 20% of its sales volumes and sources 35-40% of its components from EU member nations.

With the UK exiting the EU, the cost of sourcing components from the European states and selling its vehicles in the region will go up as duties and tariffs coming into play. On the flip side, analysts said

JLR will be a major beneficiary as the government will provide incentives to ensure that the UK's automotive industry remains competitive.

Also, the depreciation of the pound could positively benefit the company's earnings through exports.

With respect to the sale of Tata Steel UK, Financial Times, quoting unnamed sources, said there will now be "recalibration" after Brexit.

The UK unit exports 12% of its volume to various EU member nations "If Britain were to exit the EU, Tata Steel would no longer be able to influence some of the major regulations such as environmental controls and anti-dumping measures which impact its UK operations," Tata Steel had said prior to Brexit.

The EU referendum result could also bring about changes in British Pension Scheme, negatively impacting the unit's 11,000 employees.

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