As the deep political turmoil in Bangladesh may force textile companies to start outsourcing from other countries like India, textile stocks like Gokaldas Exports, Century Enka, and SP Apparels rallied up to 18% on Tuesday morning.
Shares of Gokaldas Exports zoomed 18% to a fresh 52-week high of Rs 1,089.40 on the NSE as investors believe that the Bangladesh crisis will boost textile exports from India.
Other top gainers were KPR Mill (16%), Arvind Ltd (11%), SP Apparels (18%), Century Enka (20%), Kitex Garments (16%) and Nahar Spinning (14%).
"This unrest will undoubtedly damage the country's brand value in the eyes of the US and European manufacturers, who often give Bangladesh preference. Consequently, the garments and textile sector in India may gain an advantage due to these ongoing protests and clashes," Vikram Kasat – Head of Advisory at Prabhudas Lilladher, said.
However, yarn exporters may get hit as Bangladesh is the biggest customer for yarn export as of now with a 25-30% share.
"And any disruption over there will have issues here also. But since it's a small kind of a thing, I mean it's not really very big. As of now, there is no impact on the demand. But unless it is resolved or it continues for a long period, then there could be a concern. But as of now, there doesn't seem to be an issue," Neeraj Jain, Joint Managing Director of Vardhman Textiles, said in an earnings call.
After weeks of anti-government protests and clashes between police and protestors that claimed hundreds of lives, Bangladesh Prime Minister Sheikh Hasina resigned and fled the country on Monday. The army chief said an interim government will be formed to run the country.
Also read | Bangladesh crisis: 12 listed Indian companies with exposure in troubled zone
Bangladesh is the second-largest garments exporting country and exported around $47 billion worth of ready-made garments in 2023. The South Asian country has a high double-digit share in the European Union and the United Kingdom and a 10% market share in the United States.
The civil unrest in Bangladesh could present opportunities for Indian companies in the export market as global brands may want to diversify out of the troubled zone.
The turmoil is also bad news for all Indian companies which either source their products or sell their stuff in the neighbouring country.
Marico shares, for example, fell over 4% as Bangladesh contributes about 11% of its total revenue. Several other companies like Pearl Global Industries, Emami, Bayer Corp, GCPL, Britannia, Vikas Lifecare, Dabur, Asian Paints, Pidilite, Jubilant Foodworks, and Bajaj Auto have a presence in Bangladesh.
Bangladesh is a part of the supply chain for companies like Trent, PDS, and VIP Industries.
Source Name : Economic Times