Brexit: Which Indian IT cos may gain or fall on EU referendum

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Moneycontrol Bureau If Britain decides to move out of the European Union, Indian technology companies are likely to be hurt with Tech Mahindra being most exposed while Infosys is the least exposed to the region. The Britons will vote to decide if the UK should leave or stay within the 28-member EU trade bloc on June 28.Bank of America Merrill Lynch feels that Brexit may create recession risks that could hurt IT demand further hurting 10-14 percent revenue growth for the UK businesses of the Indian IT companies in FY17.The brokerage firm says there could be a 3-8 percent hit to FY17 earnings per share (EPS) estimates for five large Indian IT companies in the case of an ‘exit’ vote. "The benefit to FY17 EPS estimates is relatively lower (2-5 percent) in the case of a 'remain' vote," it says in a report. This looks likely as several weekend polls showed the 'remain' camp regained momentum ahead of a referendum vote to decide the UK's future within the European Union (EU). The brokerage firm adds that movement in British currency, growth implications for their UK business and any spill-over implications to Europe and growth in the Euro zone are few factors that may impact Indian IT companies as a reaction to Brexit. Five large Indian IT companies have a 6.6-14 percent revenue exposure to the GBP and bulk of this is unhedged. According to it, a 10 percent swing is likely to be seen on a Brexit decision implying a 1.7 percent (Infosys) and 5.1 percent (Tech Mahindra) earnings benefit/impact for FY17.As per BoAML, Infosys may be see a -3.1 percent, Wipro may see -5.5 percent and TCS may feel -5.7 percent total impact to respective FY17 EPS from an exit vote. An exit vote may errode -7.7 percent from Tech Mahindra's FY17 EPS. As the same time, if Britain decides to remain in the union Infosys will gain 1.7 percent, Wipro will see 3.6 percent benefit and TCS will see gain of 3.7 percent to potential FY17 EPS. Tech Mahindra is likely to see EPS benefit of 5.1 percent in this situation.Follow @NasrinzStory