After the peace agreement in the Middle East, Indian companies are once again preparing to take advantage of the increasing demand in the region. Many companies have started increasing production to bring back on track the exports that were affected during the conflict. Companies manufacturing FMCG, automobile, construction equipment and electrical goods are increasing their capacity. Besides, booking of shipping space has also become faster. The industry is hopeful that due to reduction in freight charges and normalization of supply chain, there will be a new boom in business.
FMCG companies increased production
During the conflict, production capacity utilization for the Middle East was reduced to 45 to 50 percent, but now the situation is changing. Edible oil companies like AWL Agri Business, Parle Products and Dabur are preparing to take the capacity utilization of their factories to more than 90 percent for the Gulf countries. According to Angshu Malik, Executive Deputy Chairman of AWL Agri Business, during the war, an additional duty of about $100 per tonne was added to the freight, the burden of which fell on the consumers. Now, once the freight becomes normal, the prices of flour, edible oil and other essential commodities may come down by 5 to 9 percent. This will open new opportunities for Indian exporters in markets like Iran, Iraq and Saudi Arabia.
Auto and construction equipment sector also has big hopes
The country’s largest car manufacturer Maruti Suzuki is also planning to increase exports to the Middle East. Before the conflict, the sector’s share in the company’s total foreign exports was more than 12 percent, but in the last few months the company had diverted its exports towards other markets. Now after the peace agreement, the company is again focusing on this area. At the same time, JCB India also expects demand related to reconstruction in the area to increase. The company believes that the need for construction equipment will increase for the construction and repair of infrastructure in war-affected areas. This can provide new business opportunities to Indian companies in the long run.
Profit will increase due to normalization of supply chain
The Middle East is one of the most important foreign markets for Indian companies. About 35 percent of Dabur’s international business comes from the region, while Havells gets about 40 percent of its export revenue from the Middle East. This sector also accounts for about 4 percent of Marico’s total income. Mayank Shah, Vice President of Parle Products, says that the company will increase the export-related production capacity from 50-60 percent to about 90 percent. He believes that the margins that came under pressure during the conflict will now improve. Due to normalization of supply chain, reduction in freight charges and smooth functioning of business, companies may also see improvement in their profits.
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