Bangladesh Crisis Disrupts Indian Firms: Marico, Emami, and More

Bangladesh Crisis Hits Indian Firms: Marico, Emami, and Others Affected

The recent upheaval in Bangladesh has significantly impacted several Indian companies, especially those with substantial operations or market presence in the country. The political turmoil, spurred by violent protests and the resignation of Prime Minister Sheikh Hasina, has cast a shadow over trade and economic stability in the region.

Impact on Major Indian Firms

Since Sheikh Hasina’s tenure began in 2009, Bangladesh has been a key ally for India, and her sudden departure has raised concerns about potential risks to trade. The crisis has already led to a noticeable impact on Indian businesses with substantial stakes in Bangladesh.

Marico
Shares of Marico, a major player in the Indian edible oil market with its flagship Saffola brand, dropped by over 4%. Bangladesh contributes approximately 11-12% of Marico’s revenue, making the ongoing crisis a potential disruptor of its sales in the region.

Pearl Global Industries
Pearl Global Industries, which derives about 25% of its revenue from Bangladesh, saw its shares decline by more than 3%. The company’s operations in Bangladesh have been temporarily halted due to the curfew imposed amid the unrest.

Emami
Shares of Emami, another significant player with a robust presence in Bangladesh, fell by over 4%. The company faces potential disruptions in its operations due to the ongoing crisis.

Other Affected Companies

Several other Indian companies with a footprint in Bangladesh are also feeling the strain. These include Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks, and Bajaj Auto. The unrest is especially concerning for companies like Trent, PDS, and VIP Industries, which rely heavily on Bangladesh as part of their supply chain.

Textile and Garment Sector

The crisis has mixed outcomes for India’s textile and garment manufacturers. Bangladesh is a major market for Indian yarn exports, accounting for 25-30% of the total exports. While the disruption might affect yarn exporters, the impact has been minimal so far. Neeraj Jain, Joint Managing Director of Vardhman Textiles, mentioned that while the current disruption is minor, it could become a concern if the situation persists.

Conversely, the crisis presents opportunities for Indian textile and garment manufacturers to expand their market share. Shares of companies such as Gokaldas Exports, KPR Mill, Arvind Ltd, SP Apparels, Century Enka, Kitex Garments, and Nahar Spinning have surged, reflecting a positive market shift.

Adani Power

The situation has also raised questions about the power supply agreement between Adani Power Limited and Bangladesh. Under a power purchase agreement (PPA) signed in 2017, Adani Power is committed to supplying 1,496 MW of power to Bangladesh for 25 years. The project, operational since June 2023, is crucial for Bangladesh’s energy needs.

Past concerns over the pricing of coal supplied by Adani Power may resurface amid the political changes. However, any drastic revisions to the agreement could impact investor sentiment, given Bangladesh’s urgent need for power. Adani Power continues to supply electricity to Bangladesh as per the PPA, with the company highlighting that the power from its Godda Power Plant helps replace costly liquid fuel-based power.

Looking Ahead

Analysts suggest that the future impact on stocks tied to Bangladesh will depend on the duration and resolution of the unrest. Market expert Hemang Jani indicated that if there is a significant correction in companies like VIP or Marico, it might present a buying opportunity for investors.

The unfolding situation in Bangladesh underscores the interconnected nature of global economies and the far-reaching effects of political instability on international business.