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Informist, Tuesday, Aug 6, 2024

 

By Avishek Rakshit

 

KOLKATA – Marico Ltd and Emami Ltd are the only two large Indian fast-moving consumer goods companies that are likely to be affected by the political crisis in Bangladesh. While 11% of Marico's consolidated revenues came from Bangladesh in 2023-24 (Apr-Mar), the country accounted for 5% of Emami's topline.

 

Most other fast moving consumer goods companies are unlikely to be affected by the ongoing crisis in Bangladesh due to low exposure.

 

For Tata Consumer Products Ltd, Britannia Industries Ltd, Dabur India Ltd, and a few others, the contribution from Bangladesh to their consolidated revenues was not even 1%. Marico and Emami are the two companies to have a substantial presence there and are likely to feel the heat if tensions in that country escalate and lead to an economic downturn.

 

During the year ended March, Bangladesh accounted for 11 bln rupees of Marico's total revenue of 96.5 bln rupees. For Emami, Bangladesh accounted for 1.7 bln of its total revenue of 35.8 bln rupees.

 

Industry officials said that the crisis in Bangladesh which reached its peak on Monday leading to the resignation of Sheikh Hasina as the prime minister and her subsequent escape from the country to India, has been going on for the past 3-4 months, causing disruption in demand and distribution channels. Moreover, there was some anti-Indian sentiment leading to a boycott of Indian products--the ripples of which were felt by companies based out of India but having manufacturing operations in Bangladesh.

 

"The shopkeeper identifies the company name with the brand and if the company is India based, then the brand or the product automatically gets associated with India irrespective of the fact that it was manufactured in Bangladesh," a senior official at a medium-sized consumer goods company said, requesting anonymity due to the sensitivity of the issue.

 

The official said some shopkeepers in Bangladesh are refusing to sell Indian products or products associated with India due to anti-India sentiment. A research article on May 14 by the Observer Research Foundation had also said this.

 

According to Invest Bangladesh, which promotes foreign direct investment there, Bangladesh's per capita expenditure on consumer goods products was $23, in contrast to India's $44. Comparatively, it is much higher at over $100 in China and Indonesia. It is expected that the fast moving consumer goods market in Bangladesh will reach a market size of $169.1 mln by 2027, growing at a compounded annual growth rate of 24.1%.

 

Marico sells a wide range of products such as coconut hair oil, value added hair oils, skin care, baby care, hygiene, male grooming, edible oil, and food products in Bangladesh. Emami sells its range of hair oils and skin care products there.

 

In a call with the investors after announcing the financial performance for Apr-Jun, Emami's Vice-Chairman and Wholetime Director Mohan Goenka had admitted, "This month, Bangladesh has been a disaster in the international business. So, there are some external circumstances, which just keep on coming in...”

 

On Monday, Marico, which has the largest exposure in Bangladesh among all Indian consumer goods companies, dodged repeated queries from investors over the situation in Bangladesh and how it affects Marico. "I can only say in times like these, the strong gets stronger, and the weak gets weaker," said Saugata Gupta, the managing director and chief executive officer of Marico.

 

Both Marico and Emami have been reporting a decline in their revenues from Bangladesh, which both companies have attributed partially towards the depreciation of the Bangaldeshi taka. Marico's revenues from Bangladesh fell by 5% during 2023-24, and for Emami the decline was nearly 3%.

 

Comparatively, companies such as Britannia, or Tata Consumer Products, or Dabur that have subsidiaries in Bangladesh, have miniscule exposure to Bangladesh and their sales in that country do not affect their financial performance.

 

"It is a wait and watch situation now in Bangladesh is all that I can say. For us, Bangladesh accounts for less than 1% of our revenues and is less than 0.5% of our profits," a Dabur spokesperson said. Dabur, however, has a plant at Dhamrai in Bangladesh which makes products locally. Its assets in Bangladesh are valued at a little over 1 bln rupees.

 

Officials from other large consumer goods companies said they are also adopting a wait-and-watch approach as the situation is political, and the Indian as well as Bangladeshi governments need to clear their stand first over the ongoing civil conflict in Bangladesh.

 

Emami has a plant in Bangladesh and its net assets in Bangladesh is valued at 935.7 mln rupees, making up for 3.8% of the company's total assets.

 

For Marico, however, Bangladesh accounts for a substantial share of total its asset base. The company has two plants near Dhaka and five depots in Dhaka, Comilla, Jessore, Chittagong, and Bogra, which account for nearly 15% of its total net asset base of 42 bln rupees as at March 2024.

 

Marico, however, has planned to gradually lower the revenue contribution from Bangladesh towards its total sales. The country contributed 44% towards Marico's revenues from exports during Apr-Jun, which Marico wants to cut to 40% by April 2027. During 2021-22, Bangladesh accounted for 51% of Marico's revenues from exports and global operations.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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