Kerala floods impact: CLSA says these companies may report lower earnings in September quarter

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Updated: August 21, 2018 10:04:32 AM

Kerala floods impact: Even as India’s southern state of Kerala witnesses the worst flood in in more than a 100 years, global brokerage firm CLSA said that select companies could see an adverse impact in September quarter results.

CLSA notes that cement companies such as Ramco and India cements will be impacted.

Kerala floods impact: Even as India’s southern state of Kerala witnesses the worst flood in in more than a 100 years, global brokerage firm CLSA said that select companies could see an adverse impact in September quarter results. According to experts, 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.

CLSA notes that cement companies such as Ramco and India cements will be impacted. Notably, Kerala forms around 14% of cement demand from southern markets. According to the firm, auto companies Maruti Suzuki and Eicher Motors will also see adverse impact. In the jewellery space, Tata Group firm Titan will also see impact.

The floods have severely impacted the rubber industry. This will have a direct bearing on tyre manufacturers. CLSA said that a small impact is also seen on Marico as production of rubber and copra is also impacted. Experts point out that the floods in Kerala will hit the natural rubber production (Kerala accounts for about 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. “In ICICI Lombard, the losses could be 3-4% of FY19 profits,” CLSA noted. According to the firm, 10% of Sun TV’s revenues are attributable to Kerala.

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