Gillette, Emami, Pidilite Face Pressure As Bangladesh Tension Threatens Revenue, Business

Gillette India Ltd. announced on Tuesday that Procter & Gamble Bangladesh has decided to terminate its distribution agreement with the company, effective Dec. 31, 2024. The company disclosed this in a regulatory filing, noting that while the termination will result in a proportionate drop in net sales under the pact, it will not have a significant impact on its profits.

The distribution agreement contributed around 2% of Gillette India's total net sales last fiscal, meaning the financial impact from the termination will be relatively minor. However, the reason behind the termination was not specified in the filing.

This development comes amid rising political instability in Bangladesh, which has been affecting the operations of several Indian consumer companies, including Emami Ltd., Marico Ltd., and Pidilite Industries Ltd. These companies, which have significant business interests in Bangladesh, are feeling the strain of the uncertain political environment, which poses challenges to growth and profitability in the region.

While Gillette India's exposure to the Bangladesh market is relatively small, other Indian consumer companies with larger stakes in the region are closely monitoring the situation. Stocks in the space came under pressure in trade on Wednesday, as turmoil in the neighbouring nation could mean a more pronounced impact on their business.

A key player in the Bangladeshi market, Marico derives 44% of its international business from the nation. Its wholly-owned subsidiary, Marico Bangladesh Ltd., reported revenue of Rs 1,103 crore for the previous fiscal, accounting for 11% of Marico’s total topline. With such a large portion of its business tied to Bangladesh, any fluctuations in the market or regulatory landscape could significantly impact Marico's overall performance.

Emami Bangladesh Ltd., a wholly-owned subsidiary of Emami, operates a factory in the country. In fiscal ended March, the Indian FMCG major clocked Rs 17,423 crore in revenue, with Bangladesh accounting for 6%. Although the contribution might appear modest, the growing competitive landscape and economic challenges in Bangladesh present potential risks.

Asian Paints (Bangladesh) Ltd., the Bangladeshi subsidiary of Asian Paints Ltd, generated Rs 10 crore in revenue last fiscal. Additionally, the Indian paint behemoth's earned Rs 12 crore in royalty from its unit and took out a Rs 12 crore loan from Standard Chartered Bank of Bangladesh. The company’s share in profit from Bangladesh stood at 0.2% in the year to March 2024, signaling a relatively small, yet noteworthy contribution.

Pidilite Industries operates in Bangladesh through two wholly-owned subsidiaries: Pidilite Speciality Chemicals Bangladesh Pvt. and Nina Percept (Bangladesh) Pvt. Last fiscal, the former made up 4.23% of the profits of the Fevicol maker, while Nina Percept’s share in profits was 0.21%. Although Bangladesh forms a smaller portion of Pidilite’s overall business, it remains an important growth market.

Jubilant FoodWorks Ltd., which operates the popular Domino’s Pizza brand, recently completed the 100% acquisition of the pizza chain in Bangladesh. The company also holds the rights for fried chicken franchise Popeyes in the country. By December quarter of the last fiscal, Jubilant had 26 stores operating in Bangladesh, positioning itself for further expansion in the region.

Godrej Consumer Products Bangladesh Ltd. is a 100% subsidiary of the Godrej Consumer Products Ltd. With its established presence, the company is leveraging the growing demand for consumer products in the Bangladeshi market.

VIP Industries Ltd. sources 30-35% of its production capacity from Bangladesh, making the country a critical component of its supply chain. Any disruptions in the Bangladeshi market could have a ripple effect on VIP’s ability to maintain production levels.

Shares of Gillette, Dabur, Marico, Godrej consumer, closed 3.1%, 4.4%, 2.4%, 1.5% lower as compared to benchmark Nifty 50 closing 0.3% higher.