India Inc earns 72% of revenue from the domestic market: Morgan Stanley

72 per cent of the revenue of Indian firms (India Inc) is derived from the domestic / home market – the sixth highest in percentage terms in the emerging market (EM) and the Asian region, said a recent report by Morgan Stanley. The balance, according to the report titled ‘Global Exposure Guide 2021’ co-authored by analysts led by Jonathan F Garner, their chief Asia and emerging market strategist, is split between the developed markets (DMs) and other EMs. The report is based on an analysis of 3,300 companies globally that have revenue exposure in 17 different regions.

Chinese companies, according to the report, derive 86 per cent revenue from their home market and 7 per cent each from DM and EM. EM/Asia Pacific ex-Japan (APxJ) companies, the report said, generate around 6 per cent of revenue from government expenditure directly.

“Chinese and Indian companies in particular source 9 per cent of revenue from government expenditure. By industry group, the revenue from government expenditure is concentrated in a few key industries – capital goods, commercial & professional services, software, and utilities,” Morgan Stanley said.

On an aggregate basis, 72 per cent of EM companies’ revenues come from their home country. The remaining 28 per cent is split equally between EM and DM countries with North America and Europe each accounting for 7 per cent and 5 per cent respectively, of EM sales exposure.

In contrast, US companies derive 71 per cent of their revenues domestically, 12 per cent from Europe, 8 per cent from APxJ (including 4 per cent from China) and 4 per cent from Latin America. On the other hand, 46 per cent of European company revenues come from Developed Europe, followed by 30 per cent from EM and 21 per cent from North America. China exposure is around 8 per cent.

Eye on Asia, EM

Among the other Asian and EM, Taiwanese, Saudi Arabian, Hong Kong, Singaporean, South African, and Mexican companies derive over half of their revenue from foreign markets. Among the lot, Taiwanese, Mexican, Japanese, Saudi Arabian and Korean companies are the most exposed to the US, each generating over 10 per cent of their revenue from the US.

“Taiwanese companies, in particular, generate 27 per cent of their revenue from the US market, largely because Taiwan is an important part of the semiconductor supply chain and serves as major suppliers for Apple. Russian companies are the most exposed to developed Europe – this mainly reflects its Energy and Materials sectors. Indonesian, Taiwanese, Hong Kong, and Australian companies are the most exposed to China in terms of revenue,” the Morgan Stanley report said.

Within the EM, the information technology (IT) sector tops in terms of foreign exposure. On the other hand, real estate, utilities and financials are the most domestic- and least DM-exposed sectors.

“EM's IT and Consumer Discretionary companies are more exposed to DM markets than to EM (ex-home), while Materials, Energy and Consumer Staples are more exposed to EM (ex-home) markets than to DM,” the report said.