Kerala floods impact: After India’s southern state of Kerala saw the worst deluge in more than a century, experts point out that banking, tyre and cement are among the worst hit sectors. Taking stock of the impact on the banks, Kotak Institutional Equities said that Kerala contributes about 3% of the total loans across the country. “The four key banks to watch would be Dhanlaxmi Bank, South Indian Bank, Catholic Syrian Bank and Federal Bank which are highly dependent on this state. PSL dominates loans from this state making it susceptible to restructuring but high share of gold loans as collateral offers comfort,” the report noted.
The floods have also severely impacted the rubber industry. This will have a direct bearing on tyre manufacturers. Experts point out that the floods in Kerala will hit the natural rubber production (Kerala accounts of ~85% of domestic rubber production), leading to a likely shortage in the rubber supply. This could inflate the domestic rubber prices in the coming months and could hit the margins of tyre companies like JK Tyres, Apollo Tyres, CEAT, MRF, Balkrishna Industries.
Apart from tyre companies, crude shipments to Kochi refinery of omc’s are facing delays of 5-10 days due to heavy rains in Kerala. “We highlight here that BPCL keeps 15-20 days of crude oil inventory but any significant delay in receiving crude oil may impact throughput of Kochi refinery of BPCL in 2QFY19,” Prabhudas Lilladher said in a note.
In the entertainment and theme park industry, Kochi park footfalls will be impacted by the torrential rain and floods in Kerala. “Q2 is seasonally weak quarter for Kerala but the closure of park for 10-15 days will have one-time hit on the footfalls and would result in weak revenue performance in Q2,” said the firm. Notably, Kerala forms around 14% of cement demand from southern markets. In the near-term, companies such as Ramco Cement and JK Cement will assume heightened focus.