Marico, Dabur suspend operations in Egypt; trade disrupted on fears of looting
Moneylife Digital Team 02 February 2011

International consequences and impact on India will be more severe if situation deteriorates; other companies prefer to wait and watch for the situation to unfold

Marico and Dabur have temporarily shut down their units in Egypt and trade between the two countries has been disrupted following the worsening unrest in the Arab nation, according to companies and trade organisations.

It has been reported that at least two other companies-Asian Paints and Emami-which have operations in Egypt, are keeping a close watch on the situation before taking a decision either way. Wipro, Ranbaxy and IFFCO also have wholly-owned companies in the country.  

Meanwhile, the government has said that it has "not received any information so far" of any disruption of India's shipping movements through the Suez Canal, following the Egyptian crisis.

Analysts suggest that if the situation worsens, not only would the trade of goods and services between the two countries be affected, but the consequent impact on businesses across the world could hurt critical inputs like oil that would also impact India.

"Egypt (and the Middle East and the North African region) is an important market for Marico. In view of the current situation, our factories have been temporarily closed as a safety measure," said a spokesperson for Marico Industries. The region accounts for about 7%-8% of the company's revenues which totalled over Rs2,660 crore in 2009-10.

It is difficult to say how long the unrest will go on-so many companies are waiting and watching for the situation to unfold before taking a decision.

Dabur India chief executive officer Sunil Duggal said that the company has suspended its hair oil production plant in Egypt. "We are watching the developments. If the unrest continues for a longer period of time, there might be some impact," said Mr Duggal. Egypt accounts for about 2.5% of Dabur's consolidated turnover, which was about Rs3,400 crore in 2009-10.

Besides these wholly-owned units in Egypt, Tata Motors, Aptech, Iflex and Essar Global have regional offices in that country, according to information available with the Federation of Indian Chambers of Commerce and Industry (FICCI).

Trade between the two countries has also been disrupted with traders fearing looting and arson.

"At this point of time, there is disruption in both export and import trade dispatches from Egypt and these have been kept on hold," said Ajay Sahai, director-general of the Federation of Indian Exports Organisation (FIEO).

There have been reports of looting and arson, which has been a cause for worry. Exports aggregated $1.4 billion and imports totalled $1.7 billion in the last fiscal. With the pickup in demand, exports were expected to grow by 20%-25% in the current fiscal year.

Oil & gas, coking coal, raw cotton, rock phosphate and marble comprise nearly 95% of India's imports from Egypt. The principal export items are frozen meat, cotton yarn and synthetic yarn, rice, diesel, tobacco, electrical machinery, soybean, chemicals, automobiles and components, sugar, pharmaceuticals and tea.

"It is very unfortunate that that business is affected. The problems will definitely impact our bilateral trade," said ASSOCHAM secretary general, D S Rawat.
 
Maruti Suzuki, India's number one carmaker, exported around 3,000 cars to Egypt. Indian carmakers exported vehicles worth about $85 million in 2009-10, which is about 5% of the country's total car exports. Bike exports totalled about $4 million and truck exports about $1.4 million in this period.

Shipping channels do not appear to have been affected so far. "We have not received any report from either the Shipping Corporation of India (SCI) or the rest of the maritime industry about any disruption so far," said a senior official in the shipping ministry. But there are fears that the crucial Suez Canal link between the Mediterranean Sea and the Red Sea could be affected.

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