Political Turmoil in Bangladesh Unlikely to Impact Credit Quality of Indian firms: CRISIL Ratings

Leading research firm CRISIL Ratings said in its report that the recent political turmoil in neighbouring Bangladesh is unlikely to have any near-term impact on the credit quality of Indian corporates.

The report said that there has also been no significant impact on India's trade with Bangladesh going forward, while the effect will vary based on industry specific exposure.

It said a prolonged disruption can affect the revenue profiles and working capital cycles of some export-oriented sectors for which Bangladesh is either a demand centre or a production hub.

In the financial year 2023-24, total trade with Bangladesh was around $12,949 million, with Indian exports at $11,065 million and imports at $1884 million.

The report said sectors such as cotton yarn, power, footwear, soft luggage and FMCG could see a negative impact. On the other hand, sectors like shipbreaking, jute, readymade garments would benefit, the report said.

India's trade with Bangladesh is relatively low accounting for 2.5 per cent of country's total exports and 0.3 per cent of total imports in the last financial year.

Merchandise exports comprise mainly comprise cotton and cotton yarn, petroleum products and energy, while imports largely consist of vegetable oils, marine products and apparel.

Companies supplying electricity to Bangladesh could see a delayed payment of dues, the report said.

Debtor risk for most sectors may increase with major transactions being carried through letters of credit (LCs) which could be invoked in case of non-payment of dues, the report said.