The unrest in Bangladesh has impacted numerous Indian businesses, particularly those with substantial operations or a strong market foothold in the region.
The recent political unrest in Bangladesh, sparked by violent demonstrations and the removal of Prime Minister Sheikh Hasina, has sparked concerns about how it may impact Indian businesses.
Having served as a crucial ally for India since 2009, Sheikh Hasina's departure could potentially jeopardize trade relations and economic stability in the region.
The ongoing turmoil in Bangladesh has already had repercussions on numerous Indian companies, particularly those with significant investments or a strong presence in the country. This impact has been reflected in the stock market, with shares of Indian firms linked to Bangladesh witnessing a decline.
Marico, renowned for its Saffola edible oil, experienced a decrease of over 4% in its stock value. With Bangladesh contributing approximately 11-12% of the company's revenue, the current crisis poses a threat to its sales in the region.
Pearl Global Industries, which derives around 25% of its revenue from Bangladesh, saw a decline of over 3% in its shares. The company's operations in Bangladesh are currently on hold due to the imposed curfew during the unrest.
Emami also witnessed a drop of over 4% in its shares. With a significant presence in Bangladesh, the company is encountering potential disruptions in its operations in the country.
Numerous Indian companies operating in Bangladesh are experiencing the impact. This list includes Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks, and Bajaj Auto.
Of particular concern are companies like Trent, PDS, and VIP Industries, whose supply chain is intertwined with Bangladesh.
Vikram Kasat, Head of Advisory at Prabhudas Lilladher, highlighted the potential challenges facing Indian corporations such as VIP, Emami, Marico, Dabur, Asian Paints, Pidilite, Tata Motors, and Hero MotoCorp.
Textile and garment sector : India's textile and garment industry is experiencing mixed results due to the crisis. Bangladesh, which accounts for 25-30% of yarn exports, could be affected by the situation, though the impact has not yet been severe. Neeraj Jain, Joint Managing Director of Vardhman Textiles, pointed out that the disruption is currently minor but could become problematic if it continues.
On the flip side, the crisis has opened up opportunities for Indian textile and garment manufacturers to capture a larger market share. The stock prices of companies such as Gokaldas Exports, KPR Mill, Arvind Ltd, SP Apparels, Century Enka, Kitex Garments, and Nahar Spinning have increased, reflecting a positive shift in the market.
Adani Power : The current situation has cast a spotlight on the power supply agreement between Adani Power Limited and Bangladesh. As per the power purchase agreement (PPA) signed in 2017, Adani Power is required to deliver 1,496 MW of electricity to Bangladesh for a period of 25 years. This project, which began operations in June 2023, plays a crucial role in Bangladesh’s power infrastructure.
Concerns have previously been raised about the pricing of coal from Adani Power. With recent political changes, there might be talks of revising the agreement. Nevertheless, experts warn that any drastic changes could affect investor sentiment, as Bangladesh remains in urgent need of power.
Adani Power remains committed to supplying electricity to Bangladesh as per the PPA and highlights that power from its Godda Power Plant serves as a cost-effective alternative to expensive liquid fuel-based power.
According to analysts, the future impact on Bangladesh-related stocks will be influenced by how long the unrest lasts and how it is resolved. Market expert Hemang Jani suggested that if companies such as VIP or Marico experience significant price corrections, it could present a buying opportunity.
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