Bangladesh Turmoil May Impact Cotton Yarn Exporters, Construction Cos

Update: 2024-09-17 17:50 GMT
The recent turmoil in Bangladesh hasn't had a significant impact on India’s trade and going forward, the effect will vary based on industry/sector-specific nuances and exposure according to credit rating agency CRISIL Ratings Ltd. (Representational Image. Image credit:X)

Mumbai:The recent turmoil in Bangladesh hasn't had a significant impact on India’s trade and going forward, the effect will vary based on industry/sector-specific nuances and exposure according to credit rating agency CRISIL Ratings Ltd. Although the agency does not foresee any near-term impact on the credit quality of Indian companies, a prolonged disruption could affect the revenue profiles and working capital cycles of some export-oriented industries for which Bangladesh is either a demand centre or a production hub, it said. Also, the movement in the Bangladeshi currency taka, will have to be watched, the agency said.

For Indian cotton yarn players, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. Their ability to compensate for sales in other geographies will be important monitorable. Their operating profit margins, however, may not be significantly impacted because cotton-yarn spreads are already modest at present.

Engineering, procurement and construction companies engaged in power and other projects in Bangladesh could see execution delays this fiscal as a sizeable portion of their workforce has been recalled to

India for almost a month now. With only a gradual ramp-up in workforce expected, revenue booking could be lower this fiscal compared with earlier expectations. Besides, companies supplying electricity could see delayed payment of dues.

Companies into footwear, FMCG and soft luggage could also see some impact because of manufacturing facilities located in Bangladesh. These facilities faced operational challenges during the initial phase of the crisis. However most have since commenced operations, though a full ramp-up and the ability to maintain their supply chain will be critical.

India’s trade with Bangladesh is relatively low, accounting for 2.5 per cent of its total exports and 0.3 per cent of total imports last fiscal. Merchandise exports mainly comprise cotton and cotton yarn, petroleum products, electric energy, etc., while imports largely consist of vegetable fat oils, marine products and apparel.

”Sectors such as cotton yarn, power, footwear, soft luggage, fast moving consumer goods (FMCG) may see a small but manageable negative impact, while ship breaking, jute, readymade garments (RMG) should benefit. For most others, the impact will be insignificant,” said the agency.

Tags:    

Similar News