Cruel summer: How Iran war shocks are silently gutting corporate profits

Subscribe to enjoy similar stories.As the West Asian crisis broke out late February, Sunil JhunJhunWala, managing director and co-founder of Tiruppur-based Techno Sportswear Pvt. Ltd, an active wear brand, moved fast.The disruption to the movement of ships through the Strait of Hormuz, he rightly surmised, would affect the supply of polyester filament yarn (PFY)–a raw material derived from crude oil—which he imports from China.

As much as 15% of global crude oil needs and 50% of China’s consumption transit through this narrow passage connecting the Persian Gulf to the Arabian Sea.He quickly dispatched a team to China to ensure continuous supply of raw material. He worked with his bankers to increase his working capital limits by 50%.

This ensured that there was no disruption in the supply of raw material, though they came at a much higher cost.“My average input cost has risen by more than 40% and this includes PFY, dyes, chemicals and packaging materials,” he said.But what JhunJhunWala did not anticipate was the second order impact.A shortage of liquefied petroleum gas (LPG) impacted food preparation at the hostels he maintained for 1,100 workers—90% of them migrants from other states. JhunJhunWala quickly set up electric boilers to facilitate cooking but they were not good enough to make rotis.

Migrant workers began to leave and those already home for Holi stayed back. Today, due to the labour shortage, he operates his factory at 60% capacity.“I have sent human resources teams to east and north India to recruit workers and am even willing to pay for their air tickets,” he said.JhunJhunWala has not been able to fully pass on the higher costs, and his margins have taken a beating.His challenges, in a way, are a microcosm