The ongoing political turmoil in Bangladesh is sending ripples across various sectors of the Indian economy, as companies with significant exposure to the neighbouring country grapple with the impact of the crisis. The political instability, highlighted by the recent resignation and flight of Prime Minister Sheikh Hasina amid mass protests, has created an uncertain environment for Indian businesses operating in Bangladesh.
Impact on Indian Companies
A range of Indian firms, spanning industries from FMCG to pharmaceuticals, retail to automotive, are feeling the pinch of the crisis. Notable companies include Marico, Emami, Dabur, Godrej, Jubilant FoodWorks, Trent, Sun Pharma, Tata Motors, and Hero MotoCorp. These businesses have established a strong presence in Bangladesh and are now closely monitoring the situation as it unfolds.
Marico’s MD & CEO, Saugata Gupta, acknowledged the severity of the situation during a recent earnings call. Marico, which has been operational in Bangladesh for two decades, derives a significant portion of its revenue from the country. Marico Bangladesh contributed 11% to the parent company’s FY24 consolidated topline and 44% to its international revenue. Gupta expressed hope for better days ahead but also noted that the company is planning to reduce its reliance on the Bangladeshi market to 40% of its international business by FY27 due to the prevailing instability.
Challenges for FMCG and Retail
The turmoil has particularly affected the Fast-Moving Consumer Goods (FMCG) sector. Mohit Malhotra, CEO of Dabur India, highlighted that while the company’s direct exposure to Bangladesh is minimal, the broader FMCG sector is facing significant challenges. Dabur’s revenue from Bangladesh is currently under 1%, but the instability poses risks for companies operating in a market that once showed considerable potential.
Emami, which operates a manufacturing unit in Gazipur, Bangladesh, has faced operational disruptions due to the ongoing protests. The company generates 5% of its total revenue from Bangladesh, and the unrest has forced it to shut down its plant, advising staff to stay safe. This situation underscores the broader impact of the crisis on manufacturing and business operations in the region.
Pharmaceuticals and Automobiles
The pharmaceutical sector is also affected. Sun Pharma, which has a presence in Bangladesh, is keeping a close watch on developments. Any significant disruption in the country could impact its supply chain and market operations. Similarly, automotive giants like Tata Motors and Hero MotoCorp, which have stakes in the Bangladeshi market, are bracing for potential disruptions in their business activities.
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Apparel Industry Challenges
The apparel industry, which relies heavily on imports from Bangladesh, is facing challenges as well. Major retailers such as Trent, Arvind Fashions, and Reliance Retail source a significant portion of their apparel from Bangladesh. With Bangladesh accounting for 1.6% of the $75 billion domestic apparel market, and large organized retailers making up about 40-50% of this share, the political unrest has impacted their supply chains. Orders for the upcoming festive season are particularly affected, raising concerns about timely deliveries and inventory management.
Rahul Mehta, chief mentor of the Clothing Manufacturers Association of India, noted that while the crisis is a temporary blip, it is causing significant disruptions. Most Indian apparel firms are not pressing the panic button yet but are waiting for the situation to stabilize. If the turmoil persists, companies may consider alternative locations for garment imports to mitigate risks.
Economic Implications
The International Monetary Fund (IMF) has projected a slowdown in Bangladesh’s GDP growth from 6% in 2023 to 5.7% in 2024, partly due to the political crisis. This slowdown reflects the broader economic impact of the ongoing unrest, which has crippled the economy for over a month. As the situation evolves, Indian companies will need to navigate the complexities of operating in a politically unstable environment while assessing their strategic options for mitigating risks.
In summary, the political crisis in Bangladesh is reverberating through Indian businesses with significant stakes in the country. From FMCG and retail to pharmaceuticals and apparel, the ongoing turmoil poses challenges that companies will need to address as they navigate this period of uncertainty.
