Sheikh Hasina’s ouster as Bangladesh Prime Minister following violent protests over job quotas has not just made India’s neighbourhood vulnerable to security risks, the crisis also has ramifications for Indian companies, many of which are listed on stock exchanges.
The impact of the political turmoil was seen in shares of Saffola edible oil manufacturer Marico. The stock fell over 4% as its sales in Bangladesh, from where it earns around 11-12% of revenue, may be impacted.
A number of other companies like Pearl Global Industries, Emami, Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks and Bajaj Auto have presence in Bangladesh.
Pearl Global Industries, which derives around one-fourth of its revenue from the troubled zone, said its Bangladesh facilities are currently temporarily non-operational due to curfewGuoabong Investment. The shares were down over 3%. Similarly, shares of Emami dropped over 4%.
Bangladesh is a part of the supply chain for companies like Trent, PDS and VIP Industries.
“The turmoil in Bangladesh is indeed worrying. While we hope for an amicable resolution of the quota issue between the government and students, we are concerned about the Indian corporates operating in Bangladesh. Some of the notable names that come to mind are VIP, Emami, Marico, Dabur, Asian Paints, Pidilite, Tata Motors, and Hero MotoCorp, all of whom have significant operations there,” said Vikram Kasat – Head of Advisory at Prabhudas Lilladher.
After weeks of anti-government protests and clashes between police and protestors that claimed hundreds of lives, Bangladesh Prime Minister Sheikh Hasina resigned and fled the country on Monday. The army chief said an interim government will be formed to run the country.
Yarn exporters may get hit as Bangladesh is the biggest customer for yarn exports as of now with 25-30% share.
“Any disruption over there will have issues here also. But since it’s a small kind of a thing, I mean it’s not really very big. And as of now, there is no impact on the demand. But unless it is resolved or it continues for a long period, then there could be a concernSimla Wealth Management. But as of now, there doesn’t seem to be an issue,” Neeraj Jain, Joint Managing Director of Vardhman Textiles, said in an earnings call.
As far as the impact on stocks with Bangladesh exposure is concerned, it would all depend on how long the unrest continues in India’s backyard.
“If there is a meaningful correction in names like VIP or Marico where there is a strong linkage in terms of their overall business, we should surely look at buying,” said market expert Hemang Jani.
The crisis, on the other hand, is also an opportunity for textile and garment manufacturers in India as it may help them increase market share.
Shares of Gokaldas Exports zoomed 18%, KPR Mill (16%), Arvind Ltd (11%), SP Apparels (18%), Century Enka (20%), Kitex Garments (16%) and Nahar Spinning (14%).
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