The increase in competition leads to an intense fight to stay competitive in the business world has led companies to look at different ventures. Now with globalization, companies across the world are looking for potential to set up plants in certain locations. Even with growth prospects some nations make inroads and diversify their business to limit any economic downfall.
This led to growth across countries in various ways. One among them is Bangladesh, which witnessed growth and is at the forefront of strategic importance for many Indian companies. In this article, we will look into some of the Indian companies which have exposure in Bangladesh.
Why do Indian companies prefer Bangladesh? What factors are involved in diversifying in order?
Indian companies prefer Bangladesh for its business environment. The lower labour costs may attract many Indian companies to seek cost-effective manufacturing options. Additionally, Bangladesh offers a growing market with increasing consumer demand, which provides an opportunity for Indian companies for expansion and revenue generation.
The geographical location of Bangladesh to India further simplifies logistics and supply chain management. Most of the companies would benefit from transportation costs and shorter delivery times. This advantage enhances operational efficiency and strengthens business relationships between the two countries.
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These benefits make it attractive for Indian businesses to set up operations there. The supportive regulatory framework helps companies navigate the local market with ease.
The manufacturing in Bangladesh is improving as compared to the GDP which is much higher than India. Women’s contribution to the national economy is another positive factor for higher growth and relates to higher consumption.
What were the recent developments in Bangladesh’s Political Turmoil that caused instability?
PM Sheikh Hasina’s party Awami League (AL) party secured a victory in Bangladesh’s recent elections in January 2024. She won the election with a margin of 74% of parliamentary seats and it was Hasina’s fifth term as PM.
There were instances of clashes with the opposition. There was an uprising against the job quota bill which restricted 56% of the quota to the family heirs of freedom fighters, women, specific groups, and backward areas in Bangladesh.
This prompted students across the nation to start protests which turned violent due to various factors. In August 2024, Hasina resigned and fled the country due to unrest and demands from the public.
The situation risks Bangladesh’s internal stability, international relations, and economy, underscoring the urgent need for reforms to restore trust in its framework.
Indian company’s presence, development and exposure in Bangladesh
VIP Industries
VIP Industries is into manufacturing of luggage which is based in India. VIP’s prime segment is the marketing and manufacturing of bags, luggage, and accessories. Geographically, they derive most of their revenue from India.
VIP is into luggage and they have a range of brands which includes VIP Bags, Carlton, Aristocrat, Skybags, Caprese, and Alfa. From those, they sell rucksacks, trolleys, duffel bags, backpacks, travel accessories, laptop bags, and others..
The company owns 10 manufacturing facilities out of which 2 are in India and 8 in Bangladesh. VIP in their recent annual report FY24, shared that due to reduced demand for the luggage segment, they have restructured the Bangladesh facility. In their recently released Investor presentation, the company has restricted fresh purchase of raw materials and was closely monitoring the situation.
VIP has its 4 subsidiaries in Bangladesh. The VIP Luggage Pvt Ltd had a turnover of Rs. 406.32 crore with a PAT of Rs. 46.56 crore. For VIP Industries BD Manufacturing Pvt Ltd had a turnover of Rs. 178.57 crore and a Net loss of Rs. 1.04 crore. VIP Accessories BD Pvt Ltd’s turnover was Rs. 28.59 crore with a PAT of Rs. 5.96 crore in FY24.
Marico
Marico is the marketer, and manufacturers of health care, food products, and skin care. The portfolio consists of hair serum, coconut oil, edible oil, value-added hair oil, body lotion, anti-aging creams, and others. They produce and market their products under the brands of Nihar Uttam, Hair Code, Black Chic, Caivil, Revive, Livon, Parachute, Saffola, Set Wet and others.
They sell their products through e-commerce, retail outlets, and modern trade. Marico exports its products to the Middle East, South Africa, Egypt, Malaysia, Bangladesh, and Vietnam. They are headquartered in Mumbai.
The company has a subsidiary named Marico Bangladesh Limited and Marico Bangladesh Industries Limited. Marico earns revenue from Bangladesh which contributes 11.42% in FY24, a 4.83% fall YoY.
The company’s revenue from the sale of products in FY24 was from Edible – 50.95%, Hair Oil – 21.16%, Personal Care – 16.50%, and the remaining 11.39% from others in FY24. In International business in FY24, Bangladesh’s contribution was 44% and the company plans to reduce exposure to 40% by FY27.
Adani Power
Adani Power is into operation and maintenance of solar and thermal power projects. In India, APL is one of the largest Private sector Independent Power producers (IPP). From their long-term PPA with State Distribution Companies, the company provides electricity transmission to the central and state utilities.
The company’s interests are in various plants under and under development stages. They operate in Chhattisgarh, Gujarat, Madhya Pradesh, Maharashtra, Karnataka, and Rajasthan, India. The company is headquartered in Ahmedabad.
Adani Power supplies 100% of its electricity output to Bangladesh from the Godda Ultra Super Critical Thermal Power Plant. In 2017, APL entered into a PPA with the Bangladesh Power Department Board to supply 1,496 MW from Godda.
The plant comes under Adani Power Jharkhand Limited which posted results of Rs. 7,515 crore as total income with a PBT of Rs. 1,242 crore in FY24. The electricity generation by the company contributed 10.49% towards power exports and 14.64% among exports based on total turnover.
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Dabur India
Dabur India markets, develops, and sells healthcare products. Dabur’s product portfolio includes digestives, cough and cold syrups, health supplements, energizers, drops, and others. They even offer moisturizing creams and lotions, hair oils, toothpaste, shampoos, room fresheners, and others.
Brands like Vatika, Dabur Amla, Hajmola, Odomos, and Odonil are marketed by Dabur. Their product is sold through retail chains, e-commerce, and specialized channels. They even sell their products through chemists, beauty retailers, salons, and ayurvedic pharmacies. It has a presence across the world and is headquartered in Ghaziabad.
The company has a subsidiary named Dabur Bangladesh Pvt Limited. Dabur India has one of the manufacturing locations situated in Bangladesh. They produce Red Toothpaste, Honey, Meswak, and Hajmola. The subsidiary company had a turnover of Rs. 128.22 crore and a PAT of Rs. 6.47 crore in FY24.
Jubilant FoodWorks
Jubilant FoodWorks is into food services company offering fast-food products. It operates from its food and beverages segment. They have retail stores through which home-grown and international brands. The company operates under the brand names Domino’s Pizza, Hong’s Kitchen, Dunkin Donuts, ChefBoss, and Ekdum.
Jubilant operates in India, Nepal, Bangladesh, and Sri Lanka. They are headquartered in Noida, Uttar Pradesh, India.
The company had incorporated Jubilant FoodWorks Bangladesh in 2018. They hold 100% of the shareholding with a turnover of Rs. 52.93 crores and a loss of Rs. 8.88 crores as reported in the recent annual report. Jubilant has 28 stores in Bangladesh under the Brand name Dominos in FY24.
Conclusion
As we near at the end of the article, we looked into some of the stocks having exposure to Bangladesh. We even understood why some companies prefer Bangladesh as geography. Many companies outsource their work to get better cost benefits to maximise profits.
As companies diversify their operations, the manufacturing process needs diversification. The underlying risks should be minimised to hurt the company’s operations. The recent unrest shows how it can impact companies across the region. What do you think about the diversification of these companies? Let us know your views in the comments section below.
Written by Santhosh
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