Bangladesh crisis: Marico, VIP among stocks likely to be impacted amid political turmoil in neighbouring country

Bangladesh, a close ally of India, is currently experiencing political turmoil. Former Prime Minister Sheikh Hasina resigned and fled to a "safe location" on Monday following a new wave of anti-government protests that have rocked the country.

The job quota that sparked the nationwide protests in Bangladesh provided reservations in government jobs to relatives of veterans who fought in Bangladesh's war of independence in 1971.

As the situation in Bangladesh continues to deteriorate day by day, Indian firms with significant exposure to the country are expected to face the heat. From consumer goods to QSR companies, a range of sectors are likely to be affected, with some companies already feeling the pinch.

In this article, we explore the Indian companies most likely to be impacted by the Bangladesh crisis and what it means for their future prospects.

FMCG companies

For most FMCG companies, except Marico, revenue from Bangladesh constitutes between 2% and 5% of their total income, indicating that the impact on overall margins may be limited. 

Marico, however, has a significant local presence in Bangladesh and has experienced strong growth in its international business in FY24 due to a steady recovery in the region. Over the past few years, Marico has been diversifying its dependence on the Bangladesh market.

In recent years, Marico has seen a strong ramp-up in MENA (Middle East and North Africa) through the expansion of its Hair Oils portfolio, as well as healthy traction in the Hair Care and Health Care portfolios in South Africa. This growth momentum and profitability in MENA and South Africa have structurally strengthened the business, providing margin upside over the medium term. Additionally, in Vietnam, expansion into female personal care has created new growth levers for the business.

The resultant geographical diversification within Marico's overall international business is reflected in the reduction of revenue and profit dependence on the Bangladesh market. The company's international business revenue, which was 51% dependent on its operations in Bangladesh in FY22, has reduced to 44% in FY24. The company plans to further decrease this share to about 40% by FY27, as per the company recent annual report. 

Emami, headquartered in Kolkata, West Bengal, operates six manufacturing facilities in India and one in Bangladesh. The company incorporated Emami Bangladesh in 2004, where it manufactures, imports, and sells cosmetics and ayurvedic medicines from its unit in Dhaka. 

For the financial year ending March 31, 2024, Emami Bangladesh reported revenue of ₹174 crore as compared to Rs.179 crore in the previous year, which accounts for 5% of the total company revenues. It generated a net profit after tax of ₹43.74 crore, up from ₹38 crore in the previous year.

Dabur also manufactures and markets a wide range of consumer goods under categories like hair care, oral care, home care, healthcare, and skincare in Bangladesh. Other FMCG companies, such as Godrej Consumer Products and Britannia, have less than 5% sales exposure in Bangladesh, according to Avimnash Gorakshkar, Head of Research at Profitmart Securities.

QSR space

Jubilant FoodWorks has identified Bangladesh as a key market, significantly increasing its presence in FY23 by opening a record number of 8 new stores, bringing the total count to 17.

The company implemented several initiatives, including menu expansion, packaging innovation, and the introduction of "Live Pizza Theatre" (live streaming of pizza preparation), which helped scale its operations. However, the Bangladesh market accounts for only 1% of the company's total sales.

Luggage makers

VIP has a substantial presence in Bangladesh, operating eight advanced manufacturing facilities, which account for 30–35% of the company's total production capacity.

The company has recently restructured its Bangladesh manufacturing facility, including reducing manpower, in response to the decline in soft luggage demand, the company said in its recent annual report. 

Textile firms likely to benefit

Bangladesh's textile industry is a significant sector of the country's economy, accounting for 80% of its exports and 15% of its GDP. The country primarily exports textiles to the European Union, United States, Canada, Australia, and Japan.

Over the years, Bangladesh has increased its exports to the USA, taking advantage of the China-plus-one strategy and geopolitical tensions between the United States and China. In 2018, Bangladesh's share of textile and apparel exports to the USA was 7%, while China's was 33%.

By 2022, China's share had dropped to 22%, and Bangladesh's share had risen to 10%. Meanwhile, India has also benefited, increasing its share from 5% in 2018 to 6% in 2022.

If the current turmoil escalates further in Bangladesh, it may lead international buyers to shift their focus to alternative markets like India. India’s gain will be an additional business of $300–400 million per month if 10–11 percent of the neighbouring country’s exports are diverted to Indian hubs like Tiruppur, Business Standard reported, citing sources.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.