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Last Updated : Oct 18, 2019 09:24 PM IST | Source: Moneycontrol.com

Brexit deal inked, Tata companies can heave a sigh of relief

The group operates 19 companies across the continent, with over 60,000 employees


More than anything, it's the uncertainty that hurts business.

And for the Tata group, which has been present in Europe since 1907, the questions around Brexit since it was announced in 2016, had created pain points for some of its largest businesses, including Tata Motors, Tata Steel and Tata Consultancy Services.

That is why the announcement of a Brexit deal between the UK and European Union is a welcome development for the conglomerate. Tata is among the biggest employers in the region. It is also among the highest investors, spending about $60 billion in the UK alone over a little over a decade.

Close
On October 17, the UK and the EU agreed upon a Brexit deal, which will now need to be approved by the parliaments of the two sides. UK Prime Minister Boris Johnson in his tweet said, "We've got a great new deal that takes back control. Parliament should get Brexit done on Saturday..."
Immediately after the announcement, shares of Tata Motors jumped nearly 10 percent. Both the UK and Europe, are among the biggest markets for its unit JLR. Shares of Tata Steel and TCS were more muted, going up by 2.36 percent and 1.26 percent, respectively.


In interview with Moneycontrol earlier this week, TCS senior executive V Ramakrishnan had said that while the software giant had grown strongly in the continent in the last three years, the indecision around Brexit was hurting.

"Of late, in the UK, there has been delays in taking decisions due to the uncertainty. People are watching and waiting," the Chief Financial Officer had said.

Group presence

In 2016-17, the Tata group had international revenues of $64.40 billion, 64.1 percent of its total revenues, with the UK and the US being the two main overseas revenue contributors.

The group operates 19 companies across Europe, with over 60,000 employees. "In the UK, Tata is among the largest industrial employers, operating in over 40 locations. Jaguar Land Rover, Tata Steel and Tata Motors are leading Tata companies in the region," says the Group website.

Tata Steel: Its European unit makes 10 million tons of steel a year. The UK facility manufactures 3 million tons a year. A possible JV deal with thyssenkrupp was turned down by the regulators, a significant setback for Tata Steel.

Tata Motors: Its JLR has earmarked investment of $50 billion in the UK till 2023, but that is under the cloud till the Brexit deal terms get clearer. About 16 percent of Tata Motors revenue come from the UK.

TCS: After the North American market, the UK and continental Europe are the biggest revenue generators for the software company. According to a Business Standard report, 15 percent of its revenues come from the UK market.

Brexit impact

As Ramakrishnan pointed out, the doubts around Brexit had slowed down decision making, and thus investments among companies. This impacted service providers like TCS.

Also, manufacturing companies such as the JLR and Tata Steel will need to understand how the movement of goods between the UK and the rest of the European markets get impacted.

Both the companies have significant presence across the European markets, and any deal between the UK and the EU will have major impact on costs and revenue calculations. JLR for instance imports a significant percentage of the parts it requires for production, and any movement in exchange rates post the deal will impact costings.

The deal

Brexit, despite the agreement between the UK and EU, is not a done deal yet.

The UK premier has a tough challenge ahead, as he needs a majority support for the deal from the House of Commons. That is easier said than done, given the varying opinions.

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First Published on Oct 18, 2019 11:21 am
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