The recent political turmoil in Bangladesh, marked by violent protests and the ousting of Prime Minister Sheikh Hasina, has raised significant concerns for Indian businesses with ties to the country. Since Hasina took office in 2009, Bangladesh has been a crucial ally for India, and her departure could destabilize trade and economic relations.
Immediate Impact on Indian Companies
Several Indian firms with substantial operations in Bangladesh have already felt the impact, reflected in the stock market declines:
- Marico: Shares dropped over 4%. Bangladesh contributes about 11-12% of Marico’s revenue, and the crisis could disrupt its sales.
- Pearl Global Industries: Shares declined by over 3%. With 25% of its revenue coming from Bangladesh, its operations are currently halted due to the imposed curfew.
- Emami: Shares fell by over 4%. Emami’s significant presence in Bangladesh faces potential operational disruptions.
Broader Implications for Indian Firms
Other Indian companies with operations in Bangladesh, such as Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks, and Bajaj Auto, are also experiencing strain. The unrest particularly affects companies like Trent, PDS, and VIP Industries, which rely on Bangladesh for their supply chains.
Vikram Kasat, Head of Advisory at Prabhudas Lilladher, highlighted potential risks for several corporates, including VIP, Emami, Marico, Dabur, Asian Paints, Pidilite, Tata Motors, and Hero MotoCorp.
Mixed Outcomes for the Textile and Garment Sector
The crisis has mixed implications for India’s textile and garment sector:
- Negative Impact: Bangladesh, a major market for yarn exports, could affect Indian exporters as it accounts for 25-30% of total exports. Neeraj Jain, Joint Managing Director of Vardhman Textiles, noted the current disruption as minor but potentially concerning if it persists.
- Positive Shift: Opportunities arise for Indian manufacturers to capture more market share. Shares of companies like Gokaldas Exports, KPR Mill, Arvind Ltd, SP Apparels, Century Enka, Kitex Garments, and Nahar Spinning have surged.
Power Supply Agreement with Adani Power
The situation has also raised questions about the power supply agreement between Adani Power Limited and Bangladesh. Adani Power, under a 2017 power purchase agreement, supplies 1,496 MW of power to Bangladesh, crucial for the country’s energy needs. While there have been concerns over coal pricing, any drastic changes in the agreement could affect investor sentiment. Adani Power continues to supply electricity as per the agreement, emphasizing the benefits of replacing costly liquid fuel-based power.
Future Outlook
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 significant corrections in companies like VIP or Marico could present buying opportunities.
