Border Adjustment Tax: Companies with exposure to the US

Global financial markets are eyeing more details on Trump's proposed Border Adjustment Tax

Global financial markets are eyeing more details on US President Donald Trump’s proposed Border Adjustment Tax (BAT), which taxes imports to the US and incentivises outbound trade. 

Border adjustment tax forms a part of a comprehensive tax reform that includes tax reforms such as lowering the corporate income tax from 35% to 20%, excluding tax on exports and imposing a tax of 20% on imports. 

As with any policy, the finer details such as which products will ultimately be taxed, rate of taxation and the exemptions are not yet known. However, given President Trump's stance on localisation and employment, any announcement to this effect will be keenly watched by the markets, analysts say.

“It is risky to write off the BAT draft legislation completely since it has powerful sponsorship amongst the Republicans in the House of Representatives while it also meets the Trump agenda of increasing the prospects of an investment cycle in America, which so far as GREED & fear is concerned is the only plausible way the American economy can re-accelerate in the manner Trump and investors are hoping for,” wrote Christopher Wood, managing director and equity strategist at CLSA in his recent weekly note to investors.

For India, US accounts for 16% of the merchandise exports (data for 9MFY17) with gems & jewellery, pharma products, textiles and garments and machinery and engineering products (including auto ancillaries) forming the main items, suggests a recent report by Antique Stock Broking.

Within auto and ancillaries space, the main players exposed to US are Tata Motors, Bharat Forge and MSS. Within the sub-set of BSE-200 index stocks with a good chunk of their revenues coming from US exports include Welspun India and Indo Count Industries in textiles / garments space and Alembic, Aurobindo, Dr Reddy's, Glenmark Pharma, Lupin and Torrent Pharma in the pharma sector, the Antique reports says. Beyond this the exports are fragmented involving many smaller companies, some even in unlisted space.

Here is a list of companies across sectors that exposure to the US.