Profits drop for Indian MNCs in Nepal

Profit-making Indian multinationals in Nepal are seeing a downturn in their revenue following a three-month-long political unrest in the Himalayan nation which has resulted in blockading of the India-Nepal border entry points.

According to The Kathmandu Post, subsidiaries of major Indian MNCs -- such as Dabur, Unilever and ITC India -- have been operating much below their capacity in the past three months which have been characterised by protests by the Madhesi community in the Nepali Terai against the country's new constitution -- the often violent protests have claimed more than 50 lives and virtually sealed the India-Nepal border.

The companies are also facing depletion of stocks and difficulties in shipping their produce for export.

According to Nepali media reports, most of the industries in the southern Terai plains -- especially in the Morang-Sunsari and Bara-Parsa industrial corridors -- have been affected by the protests.

On Sunday, Dabur share prices fell as much as two percent at the Bombay Stock Exchange (BSE).

For Dabur, the operations of its Nepal subsidiary - Dabur Nepal - are crucial as Nepal is a very important source of its juice segment. About 70-75 percent of Dabur's juice production comes from its Nepal factory.

Ever since the unrest in the Terai began, Dabur Nepal's plant at Birgunj has been catering to the domestic market only.

"The situation in our company is no different from that of all other industries," said Abhay Gorkhali, marketing head of Dabur Nepal, without commenting on the situation in the Indian market.

Dabur Nepal, according to Gorkhali, is facing several difficulties, including unavailability of raw materials and high charge for shipping produce to the market. This has made it very difficult for the company to run at full capacity.

Dabur Nepal manufactures around 30 different varieties of 'Real' juice. "We are yet to assess the impact of the ongoing turmoil. (However) The possibility of achieving the target set for this year is remote," Gorkhali said.

Unilever Nepal, too, has a similar story. "The company's profit has gone down 22 percent compared to the like quarter of last fiscal," said Ravi Bhakta Shrestha, director of Unilever Nepal. "There might be negative growth if this situation continues."

Set up in 1993 as a joint venture between Hindustan Unilever (formerly Hindustan Lever) and Sibrim Land and Industrial Co -- a subsidiary of the NE Group, Unilever Nepal manufactures and markets home care and personal care products.

Another company, Surya Nepal -- a subsidiary of ITC India -- also reported that it was operating at just 30 percent of its installed capacity. "We have a policy of maintaining stocks of finished products that can meet the demand for 60 days and stocks of raw materials enough to run the factory for 60 days ... Now, we are experiencing difficulties," a top Surya Nepal official said.

The leading cigarette producer in Nepal has two factories located in Simra and Tanahun. Dabur Nepal and Surya Nepal have their plants in the Bara-Parsa industrial corridor.

Even those companies such as Bajaj Auto, which do not have their plants in Nepal, are affected by the crisis.

Shekhar Golchha, executive director of HH Bajaj -- the authorized distributor of Bajaj motorcycles in Nepal, said their sales have gone down by 80 percent. "During the October-December period, we used to import 25,000-30,000 motorcycles from India. This time around, the import has dropped to 7,000-8,000 units," said Golchha.

Dabur, Unilever and ITC India were among the first Indian multinationals to set up their plants in Nepal after the country opted for economic liberalization in the 1990s.