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Shohini Nath
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Kerala floods and its impact on sectors

Kerala is facing a huge natural catastrophe. The devastating floods have taken the state aback but the country stands with them. The floods will adversely impact certain sectors and industries. Kerala comprises of only 5 per cent of the Indian population, but it is a highly consumption-oriented state. Many industries depend on Kerala for raw material supplies and more.
 

God's own country Kerala is receiving condolences from all over the world for many lives lost in the ravaging floods. Although the relief operations are in full swing, the impact and the long-term effects of the flood is, however unknown, but the most apparent sector to be affected is tyre and thereby the automobile sector given Kerala's monopoly in the rubber industry.

 

Tyre manufacturers such as Apollo Tyres and MRF depend on natural rubber which makes up for 40 per cent of their input cost. These input costs will be pushed over to the automakers which would affect the automobiles industry. On Tuesday, the stock of Apollo Tyres and MRF closed at Rs 262.70 per share, up by 0.38 per cent and Rs 74,518.10 per share down by 0.11 per cent, respectively.The recent trend of declining raw material cost as a percentage of revenue may reverse in Q2 for the automakers. Tyres account for 5-10 per cent of their total raw material cost.

 

On the other hand, Federal Bank and South Indian Bank derive 34 per cent and 41 per cent of their loans from Kerala, respectively. Agricultural loans and small business loans are expected to be disrupted. This would affect the recoveries of loans and reflect upon the bank's earnings in Q2. The stock of Federal Bank closed at Rs. 81.90 per share, up by 0.49 per cent and South Indian Bank closed lower by 0.84 per cent at Rs. 17.70 per share on the BSE, on Tuesday.

 

Taking a look at the FMCG industry, Marico depends on Kerala for the supply of raw materials, especially copra. Also, Parachute's sales are expected to dip by about 20 per cent, due to loss of sales contributed by the state. Marico on Tuesday closed at Rs. 362.75 per shown, down by 0.40 per cent.

 

Cement player including India Cements, Dalmia Bharat, Ramco Cements could suffer a near-term dip in sales as these companies derive considerable business from Kerala. Ramco Cements closed at Rs. 678.55, down by 0.34 per cent on Tuesday.


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