Brexit is likely to pose new challenges for global conglomerates. It may also offer new opportunities to India Inc, which is increasing its footprint in the UK and the EU. Speaking to Bloomberg TV India, Biocon CMD Kiran Mazumdar-Shaw said the fall of the pound sterling will benefit Indian companies operating out of the UK.
What kind of challenges and opportunities will Brexit pose for India Inc, especially the pharma sector?
If you look at what a weak pound means for UK exports, I think it is very favourable. In terms of the Indian exposure to UK, obviously any investment is going to be negatively impacted.
But at the same time if you look at companies operating out of the UK, they are going to be benefiting out of the weaker pound. The operational efficiency is going to improve. We have many Indian companies operating in the UK. So that way they are going to benefit. The London stock market is going to be hugely impacted. As you have seen, the FTSE has already declined about 5 per cent, which is nothing. I think you are going to see a much sharper decline in the coming week.
Biocon faces absolutely no impact because we have no exposure to the British pound. Most of our exports are dollar denominated. We have very little exposure to the euro. And that’s already hedged 18 months forward. So I think we are not going to be impacted at all. But it’s not the same for the rest of the pharma sector because I think they have exposure to those currencies. And I think that’s what they have to assess.
What are the regulatory challenges that the pharma sector could face, especially from these two blocs?
I think those are the kind of questions we need to ask. I don’t think there will be any immediate ramification. But certainly I think from the regulatory point of view, you will have to ask questions on whether we have to file separately with European Medicines Agency and Medicines & Healthcare products Regulatory Agency.
All those questions have to be answered in the near term. I think there is a lot of complexity involved in terms of the regulatory aspect, which I don’t think can be sorted out very easily. The bigger issue is going to be the financial implications of Brexit. Of course, it also means that Indian companies can actually look at M&A activity in UK. What the UK economy would look like in the future? It might be a very attractive and fast developing emerging economy.
Will Brexit have a greater political and economic impact than the Lehman crisis of 2008?
I think you are seeing it happening already. The Brexit is about political and financial fallout.
You’re already seeing that the political fallout is that David Cameron in a very mature and responsible way has taken moral responsibility and stepped down or has offered to step down as Prime Minister over the next few months.
There is a huge likelihood of Boris Johnson stepping into that job. So there is going to be political fallout. But I think more than anything else, you need to view this political fallout globally because we are seeing a kind of ‘Trumpism’ around the world, which is really about a polarised world. Why did Brexit happen? It has happened for many reasons — jobless growth was one of the reasons. There was a huge concern around immigration from the Middle East. And I think people are becoming very xenophobic. So you’re seeing this kind of polarisation throughout the world, which is very disturbing. But this is the reality.
What lies ahead for Biocon and the pharma industry?
I think Biocon is in a secure spot because we are addressing a global market that is really challenged by affordability and cost that is spiralling out of control. We see ourselves as being able to deliver on affordability and access to affordable drugs.
From that point of view, we are very well positioned.