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Informist, Monday, Mar. 17, 2025

 

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--Moody's: Samvardhana Motherson may pass tariff-linked cost rise to customers
--Moody's: Passing on US tariff impact may be difficult for Tata Motors' JLR
--Moody's: See any fall in demand from US credit negative for Tata Motors' JLR
--Moody's: TCS, Infosys better positioned to absorb US tariff-related costs
--Moody's: India continues to be one of world's largest IT labour sources
--Moody's: RIL could be indirectly exposed to escalating trade restrictions
--Moody's: RIL's strong balance sheet can absorb any tariff-led hit on demand
--Moody's: Rising global trade restrictions could reduce energy demand
--Moody's: Rising trade barriers could reduce earnings of oil, gas companies
--Moody's: Rising trade barriers could reduce earnings of mining companies
 

 

MUMBAI – Companies in the automotive, steel, chemicals and business-services sectors in South and Southeast Asia are most exposed to evolving US policies, including higher tariffs, which could reduce demand and increase costs, Moody's Ratings said in a report Monday. However, sectors like mining, oil and gas, shipping, investment holding companies, and protein and agriculture are either not significantly exposed to potential US tariffs or have mitigants to withstand the impact, the rating agency said. The mitigants include strong domestic operations, diversified supply chains, and US operations.

 

Auto-parts suppliers and luxury carmakers selling directly to the US or indirectly through their operations in Canada and Mexico would be subject to tariffs, Moody's Ratings said, adding that the impact of higher tariffs on the profitability of these companies will depend on how much of the tariffs they pass on to customers. The ratings agency expects auto-parts supplier Samvardhana Motherson International Ltd. to pass on tariff-induced cost increases to its customers, but Tata Motors Ltd. would find it difficult to do the same. A decline in demand from the US, which accounts for nearly a third of the sales of Jaguar Land Rover Automotive Plc., a subsidiary of Tata Motors, would impact the company negatively, the report said. With all Jaguar Land Rovers sold in the US produced in the European Union or the UK, the company is exposed to potentially higher US tariffs in these regions.

 

When it comes to steel and chemical companies, the proposed tariff measures by the US will have minimal direct impact, but would divert surplus steel and petrochemicals to other markets, including Asia, adding to the already high supply in the region, the report said. This would weaken prices and hence reduce the profitability of these companies. For JSW Steel Ltd., its operations in the US offer some relief as they contribute only around 7% to its revenue. The geographically diversified operations of UPL Corp. Ltd. are expected to help the company contain the overall impact of tariffs.  

 

Indian information technology companies Tata Consultancy Services Ltd. and Infosys Ltd. are better positioned to absorb increased costs due to evolving US policies, with their industry-leading profitability, the rating agency said. Though not directly subject to tariffs, business service providers are exposed to changes in US immigration policy, Moody's Ratings said, warning that stricter immigration rules could shrink the talent pool for companies operating in the US that rely on foreign workers. India continues to be one of the world's largest sources of labour in the IT industry, Moody's added. To minimise disruptions, companies such as TCS, Infosys and Hexaware Technologies Ltd. have gradually increased onshore hiring in the US. 

 

Further, the escalating trade restrictions among countries could slow global economic growth and reduce demand for energy, the report said. This would likely lower commodity prices and, in turn, reduce earnings of mining and oil and gas companies. Reliance Industries Ltd., which exports around half of its production from its oil-to-chemicals segment, would likely be exposed indirectly to the trade restrictions among countries, the report said. However, the company's strong balance sheet is seen absorbing potential declines in demand or profits. On the other hand, state-owned Oil and Natural Gas Corp. Ltd. is shielded from the direct impact of US tariffs as it mainly serves the Indian market, Moody's Ratings said.

 

Moody's Ratings said companies in sectors such as property development and real estate investment trusts, telecommunications, and gaming as not exposed to the evolving US policies, including higher tariffs, as they primarily have domestic operations and sales.  End

 

Reported by Arya S. Biju

Edited by Ashish Shirke

 

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