Brexit may not have a significant impact on IT cos: TechM

With Brexit becoming imminent how it would impact the Indian information technology companies that are exposed to UK is the big question.

Vineet Nayyar, Executive VC, Tech Mahindra, says Brexit does not see a significant impact on Indian IT companies. According to him the sterling may fall but it will have only a marginal impact for them. He said, they keep facing these kind of currency problems time and again.

Although their exports to the UK form 20-25 percent of their total revenues, he is not overly worried because the currency will float back according to him. “These are temporary movements, UK economy is strong,” he said.   

Below is the verbatim transcript of Vineet Nayyar's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Latha: Brexit is imminent, Brexit is happening, how will business get impacted at, for instance, Tech Mahindra? A: There would be a marginal fall in the sterling as you have already been discussing. To that extent, when we compute our income in terms of US dollar, you will see a marginal effect. But I don’t particularly see any significant impact on India or especially on the IT side. We have been facing this all the time with the dollar going down, with the other currencies going down or up but we have managed somehow one or another. Obviously the issue which you are discussing is what is its impact on UK, what does it mean, what does it defy and it would be wrong to underestimate the issues, which underlying this change. There is increasing feeling both in the US and in UK that the income disparities are growing and that is leading to these kinds of lash back on immigration, on imports from underdeveloped economies or developing economies that is the issue, sociological or political issue that these countries will have to reckon with. Reema: If you could tell us what is the percentage of revenues that you get in pound and secondly what is the sensitivity? If there is a 10 percent appreciation in the pound it may seem today, what will be the impact on the company's revenues, if you could give us a sensitivity of Tech Mahindra? A: Our exports to UK are almost 20-25 percent of overall exports but I would not bother about it. There will be a fall but very soon, I do believe the currency will float back. Remember the time when many years ago, when US insisted on keeping sterling as its currency to be a part of the Union, everybody said and everybody feared and there was a fall in sterling. Everybody feared that 30 percent fall in sterling. What in fact has happened over the years is sterling has strengthened by 30 percent. So these are temporary pointers. Ultimately, the UK economy is strong and I think it will overcome this minor fluctuations.