7 Stocks that Could Benefit from India -UK FTA

1) Pearl Global

The move will open up enormous opportunities for textiles and apparel, as these items attracted duties of up to 12% earlier.

Now, the FTA eliminates nearly all duties on Indian textile and apparel exports, providing a big opportunity. This is expected to benefit Pearl Global, which surged over 10% after the news broke.

The company manufactures readymade garments in various categories, including knits, wovens, and denim. It operates in the men's, women's, and kids' wear segments.

It can manufacture 82 million garments annually and serves renowned international brands like GAP, Kohl's, Mango, Tommy Hilfiger, Ralph Lauren, and Zara.

What stands out about Pearl Global is its global presence, including the UK. About 72% of its revenue come from exports. India contributes the remaining 28%.

Pearl Global earns about Rs 2.5 billion (bn) from the country, which constitutes about 7% of revenue. With the FTA, the management expects the UK market to become 2-3 times its current size in the coming two years.

Its growth has remained strong over the past few years. Revenue has grown at a compound annual growth rate (CAGR) of 15% over the last 4 years to Rs 34.5 bn in FY24, driven by rising volumes. The margins also improved to 8.96%, leading to profit growth at 67% CAGR to Rs 1.7 bn.

2) Tata Consultancy Services

As Asia's largest IT services and consulting firm, it ranks second globally, trailing only behind Accenture.

TCS provides comprehensive services such as consulting, service integration, and application management. It serves the banking, capital markets, education, healthcare, and insurance sectors.

The FTA offers a three-year exemption from the UK social security (National Insurance) contributions for Indian workers. This is expected to save up to 20% of their salaries, benefiting over 60,000 professionals annually. The benefit for the sector is expected to exceed Rs 40 bn.

TCS gets 16.5% of its revenue from the UK, while about 14% comes from continental Europe. TCS is expected to benefit from this move.

The company also boasts strong fundamentals. Over the last five years, TCS revenue and net profit have grown at a CAGR of 10.5% and 7.9%, respectively.

Looking ahead, the company is navigating challenges related to the slowdown in demand in the US market. At the end of Q4FY25, TCS's order book stood at US$ 12.2 bn.

After a muted performance in FY25, the company anticipates revenue growth of 0-3% and margins between 20-22%.

3) Sona BLW Precision Forging

Sona BLW is one of India's leading manufacturers of precision forged differential bevel gears and differential assemblies for various vehicle segments.

As of the end of FY24, the company had a market share of 8.8% in the global differential gears and 4.4% in the starter motors.

The company is a leading exporter, with 71% of its revenue from the export market and the rest from India. Of the 71%, 24% comes from Europe, its largest market after the US.

The company serves customers worldwide, including seven of the top 10 passenger vehicle manufacturers. Customers include Tata, Maruti Suzuki, John Deere, Mahindra & Mahindra, and Tesla.

It generates 71% of its revenue from the passenger vehicle segment. Sona is a major player in the battery-electric vehicle segment, with 36% of its revenue coming from it.

Under the FTA, import duties on auto parts, engines, and components will be zero. This will create new export opportunities for Sona, making its parts more competitive in the UK market.

It can now export its high-value EV and conventional drivetrain components duty-free to the UK, improving its cost advantage and ability to win business.

Looking ahead, the company's net order book at the end of FY25 stood at Rs 242 bn. This provides a strong revenue visibility.

4) Apex Frozen Foods

Apex Frozen is one of India's leading processed shrimp processors and exporters.

Customers include food companies, retail chains, restaurants, club stores, and distributors. The company is a major export player with a presence in the US, EU, and China.

The EU contributes 45% of Apex Frozen Foods total revenue, while 52% comes from the US, and 3% from China and other countries.

The European market continues to remain robust for the company. It witnessed a sales growth of 73% from last year in Q3FY25 in the EU market.

The removal of tariffs on 99% of Indian exports to the UK, includes marine products like frozen shrimp, a key product for Apex. Thus, the move will give it free access to supply the UK market at competitive prices, helping it increase volumes and push growth.

Looking ahead, the company is awaiting regulatory approvals to sell ready-to-eat (RTE) products in the EU market. The company aims to tap into the growing demand in the RTE segment.

5) United Spirits

United Spirits is India's leading beverage alcohol company, and a subsidiary of UK-based global leader Diageo PLC. The company manufactures, sells, and distributes a broad portfolio of both Indian-made foreign liquor (IMFL) and imported brands within India.

The company portfolio includes Diageo's premium brands, such as Johnnie Walker, Smirnoff, Baileys, and VAT 69, which are imported, bottled, and sold in India. Domestic brands are McDowell's No. 1, Signature, and Royal Challenge.

The company has nine brands selling more than a million cases yearly, with one selling more than 25 million cases annually.

As the FTA initially reduces the duties on UK whisky from 150% to 75%, and then to 40% over 10 years, United Spirits stands to gain the most.

The company can import the Diageo brands at much lower costs, which helps it drive volume growth while improving margins.

This will also increase scotch whisky exports to India by £1 bn over the next five years, benefiting United Spirits. It could also take advantage of lower duties on Scotch brands (e.g., Black Dog, VAT 69), especially since Scotch currently accounts for only a small part of India's whisky market but has vast potential.

6) Quess Corp

Quess Corp is India's largest workforce management company, with over 5 lakh employees and a footprint in nine countries. It is also one of India and Singapore's largest IT staffing players.

Although Quess Corp is domestic-focused, visa and movement norms will be simplified for Indian professionals, including contract suppliers.

This move will make it easier for Indian candidates to explore opportunities in the UK, which is directly linked to Quess Corp's core workforce management business.

In addition, the FTA also includes a three-year exemption from social security norms and quotas for Indian workers in select UK sectors. It will benefit startups and small enterprises relying on staffing firms.

This move reduces the cost of overseas assignments, benefiting Indian companies like Quess through cost competitiveness.

The company has demerged into three parts, aiming to unlock shareholder value.

7) Titan

Titan is the market leader in the domestic branded jewellery industry (with brands such as Tanishq, Zoya, Mia, and Caratlane). It is also a market leader in the domestic wristwatch segment (with brands like Titan, Fastrack, Sonata, and Zyliss).

In FY24, the jewellery segment contributed 88% of Titan's consolidated revenue and 92% of consolidated operating profit.

The company maintains a geographically diversified retail presence with over 3,300 retail stores, including 23 overseas stores in the Gulf countries, the US, and Singapore.

Currently, polished diamond and gold jewellery exports attract 5-12% duties. Thus, duty-free access after the FTA will improve export opportunities for Jewellery companies like Titan. Although Titan does not have a significant presence with retail stores in the UK, it aims to enter the country.

Looking ahead, Titan aims for 15-20% revenue growth in FY26. The jewellery operating margin is expected to be between 11% and 11.5%.

Additionally, Titan aims to increase international business revenues to US$ 300 m and expects to break even and make a small profit in FY26.

Conclusion

The India-UK FTA marks a milestone in the economic partnership between the two countries.

This deal is expected to increase UK's gross domestic product (GDP) by £4.8 bn over the long term. Bilateral trade is also expected to increase by £25.5 bn annually.

On the other hand, India was the UK's twelfth-largest trading partners, with trade worth £ 43 bn in 2024. With this deal, Indian companies, especially, will get access to a high-per-capita income country with a high propensity to consume goods.

Nonetheless, to make informed decisions, it's crucial to assess companies' fundamentals, including financial performance, corporate governance practices, and growth prospects, rather than relying solely on the hype.

Happy Investing.

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