Crisis for Indian Companies in Bangladesh: From Reliance to Adani, Which Companies Have How Much Influence?

Bangladesh Crisis: The situation in Bangladesh is continuously getting worse. Despite Sheikh Hasina resigning from the post of Prime Minister and leaving Bangladesh, the violence has not stopped. More than 440 people have been killed here so far. In such a situation, some big companies of India are worried about their business in Bangladesh. 

The impact of political turmoil in Bangladesh was seen on the shares of Marico, a company that produces Safola oil. Actually, the company earns around 11-12% from Bangladesh.

Bangladesh’s Economic Struggles: High Inflation, Political Crisis, and Future Uncertainty

First know how the economy of Bangladesh was improving after the Corona epidemic, but inflation has been very high for the last few months, which has reached almost 10%. The resignation of Prime Minister Sheikh Hasina and the army taking over power may bring more trouble to the economy. There is already a problem of shortage of money and foreign exchange reserves in the banks.

Even before the political crisis, international organizations had told Bangladesh that it should make major changes to improve its economy so that development can take place and the economy remains stable. However, despite this, Bangladesh has been one of the fastest growing economies in the world and the per capita income here is also good.

Bangladesh presented its budget on June 30. According to this budget, it set a target of keeping the inflation rate at 6% and GDP growth at 6.75%. The World Bank had said in its report in April that Bangladesh’s GDP will grow by 5.7% between July 2024 and June 2025. It was 5.6% in the same period last year.

FMCG companies may face pressure

The Bangladesh crisis may affect Indian fast moving consumer goods (FMCG) companies. These companies include Marico, Dabur, Britannia and Godrej Consumer Products Limited. In its recently released income report, Marico said that Bangladesh contributed 44% to its international business revenue in the financial year 2023-24. That is, 12% of Marico’s total earnings come from Bangladesh.

Marico said in a statement that it is trying to expand its business in countries other than Bangladesh so that its dependence on Bangladesh is reduced. But the company estimates that even in the next three years, about 40% of its total international revenue will come from Bangladesh. 

Apart from this, other big FMCG companies like Emami, Dabur, Britannia and Godrej Consumer Products also have huge business in Bangladesh. But the share of Bangladesh in the total earnings of these companies is only up to 5%.

Investment of Indian companies in Bangladesh

In the last few years, Indian companies have increased their investment in Bangladesh. They saw that Bangladesh’s economy is growing rapidly and its location is also very good. There is also a good population of youth. Being close to India makes it easy to travel to South-East Asia from Bangladesh. Many Indian companies have invested in Bangladesh in many sectors like electricity, clothes and medicines. Both the countries benefited from this.

Indian companies have invested the most money in the energy sector. Companies like Reliance (Meghnaghat power plant), Adani (plans for coal-based power plant and solar/hydro projects) and NTPC (cross-border power trade) have made a huge contribution.

Existing companies such as Tata Motors, Hero MotoCorp, Sun Pharma, Godrej and Ceat Tyres have set up or are planning to set up factories in Bangladesh. The Bangladesh government has also encouraged foreign investment by offering tax breaks, land and easy procedures.

Reliance Industries’ dominance in Bangladesh

Reliance Industries Limited (RIL), a big Indian company, has invested a lot of money in Bangladesh in the last few years. The company’s main focus is on the energy sector, especially natural gas and electricity production.

In 2019, Reliance Power signed a 22-year agreement with Bangladesh Power Development Board (BPDB). Under this agreement, Reliance Power will produce electricity from the Meghnaghat plant and supply it to BPDB. This was the first major investment by an Indian company in Bangladesh’s power sector.

Reliance Bangladesh LNG and Power Limited, a fully owned company of Reliance Industries, is building a 758 MW gas-fired power plant at Meghnaghat near Dhaka. The project is estimated to cost around $1 billion and is targeted to be completed by 2024. Adani Power supplies 1495 MW of electricity to Bangladesh from its Goda plant in Jharkhand. This supply is still continuing. 

The business of these Indian companies will be affected!

Indian two-wheeler manufacturing companies Hero Moto Corp and TVS Motor have set up assembly plants in Bangladesh in collaboration with local companies. Apart from this, Indian telecom giant Bharti Airtel also has a 28% stake in Bangladesh’s telecom company Robi Axiata. All these companies are keeping an eye on the situation there.

Tata Group’s fashion retailer Trent relies on Thailand and Hong Kong as well as Bangladesh as a source of products. However, Trent has not disclosed how much it purchases from these countries.

Luggage manufacturing company VIP Industries may be most affected by the Bangladesh crisis as 30-35% of the company’s total production capacity is in Bangladesh. The company has a total of eight modern factories in Bangladesh.

VIP Industries had said in its recent annual report that due to the decline in demand for soft luggage, it would reorganise its manufacturing units in Bangladesh and reduce the number of employees there.

India’s quick service restaurant company Jubilant Foodworks (Domino’s Pizza) also has business in Bangladesh. The company has around 28 stores there which contribute to around 1% of the company’s total sales.

Pearl Global Industries gets almost a quarter of its revenue from Bangladesh. The company says that its factory is currently closed due to curfew there. On the other hand, a Dabur spokesperson has said that the company is keeping an eye on the developments in Bangladesh but Bangladesh contributes less than 1% to Dabur’s total revenue and less than 0.5% to its total profit.

Imports from India may decrease

Recently, the import of raw materials and machines for factories in Bangladesh may decrease significantly. Also, due to low demand for consumer goods, the production of factories may also decrease and problems in the supply chain of goods may also increase. The total value of engineering goods sent from India to Bangladesh in the June 2024 quarter was $ 542.1 million. This is 8.2 percent less than the same time last year.

It is believed that the Bangladesh crisis will not have any significant or major impact on Indian companies, because these companies do business with many countries around the world and are not completely dependent on a single country like Bangladesh.

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