Impact of Bangladesh events on specific Indian sectors small: CRISIL

However, a prolonged disruption can 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, the S&P Global company said.

Sectors like cotton yarn, power, footwear, soft luggage, fast moving consumer goods (FMCG) may see a small but manageable negative impact, while ship breaking, jute and readymade garments (RMG) should benefit as they are seeing an increase in sales inquiries from key export destinations. For most others, the impact will be insignificant, it noted.

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 in the last fiscal. Merchandise exports mainly comprise cotton and cotton yarn, petroleum products, electric energy, etc., while imports largely comprise vegetable fat oils, marine products and apparel.

For cotton yarn players, Bangladesh accounts for 8-10 per cent of sales, so the revenue profile of major exporters could be affected. Their operating profit margins, however, may not be significantly affected as cotton-yarn spreads are already modest at present, CRISIL said in a release.

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.

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, CRISIL said.

Indian companies supplying electricity could see delayed payment of dues.

Pertinently, debtor risk for most sectors may increase with major transactions being carried out through letters of credit, which could be invoked in the event of non-payment, leading to dependence on Bangladesh banks for settlement. Besides, forex issues are also rising due to the depreciation of taka versus the rupee and other currencies, CRISL added.

ALCHEMPro News Desk (DS)