Bangladesh Crisis Hits Marico, Emami, VIP: Major Firms Brace for Trade Disruptions

Bangladesh, India’s neighbouring country, has been experiencing severe turmoil for the past 2 months. The crisis in Bangladesh could disrupt trade with India, impacting goods movement and stalling a potential free trade agreement.

India’s trade surplus with Bangladesh was $9.2 billion in FY24. Bangladesh is India’s 25th largest trading partner, with bilateral trade totalling $12.9 billion. Exports primarily drive the trade, making Bangladesh India’s eighth largest export partner. In FY24, India’s exports to Bangladesh decreased by 9.5% to $11 billion.

Former Bangladeshi Prime Minister Sheikh Hasina’s sudden departure amidst the country’s violence could have significant effects on India, both strategically and economically.

Impact on Major Companies

The ongoing unrest is causing significant concern for Indian companies operating in Bangladesh:

Marico

Bangladesh makes up 11% of Marico’s total business. Currently, Bangladesh contributes about 44% of Marico’s international revenue and nearly 12% of its overall revenue. According to its June quarter investor presentation, Marico plans to reduce Bangladesh’s share of its international business from 51% in FY2022 to below 40% by the end of FY2027. Marico’s share price dropped over 4% to ₹644.95 at 12:51 PM on August 06, 2024, which is crucial for its international business.

Emami

Emami operates a Bangladesh factory, contributing 6% of its total revenue. In FY23, the revenue breakdown showed that 83% came from domestic sources, while 17% was generated from international markets.

VIP Industries

VIP Industries, a luggage maker, has 8 factories in Bangladesh, where 30-35% of its production comes from. According to its latest annual report, VIP Industries restructured its Bangladesh operations and cut staff due to decreased demand for soft luggage.

Trent

For Trent, Bangladesh is a key sourcing location along with Hong Kong and Thailand, though the exact amount of sourcing from Bangladesh isn’t shared. Other companies might benefit from the disruptions in Bangladesh by shifting to a “Bangladesh+1” supply chain strategy, which could boost garment and textile stocks.

Other companies with operations in Bangladesh include Pidilite Industries, Jubilant Foodworks, Asian Paints, and Godrej Consumer Products. Dabur, GCPL, and Britannia, all in the FMCG sector, will also be watched due to their sales in Bangladesh, which account for less than 5% of their total revenue. Jubilant Foodworks, which runs Domino’s, has 28 stores in Bangladesh, contributing about 1% of its total sales.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.