Life has come to a standstill in Kerala with floods and landslides that led to unforeseen misery and chaos. The natural calamity is likely to affect companies that are located in or are exposed to the state, experts suggest.
Crash rains, flooding rivers and a series of landslides have resulted in the deaths of more than 300 people in the state during this monsoon season. More than 1.67 lakh people are rehabilitated in 1165 relief camps functioning in the state, Emkay Global said in a report.
And the numbers are on the rise.
This is a catastrophic event that has affected lives, homes, businesses and even farming activities within the state. The rubble effect is expected to be noticeable on some banks and NBFCs that have significant exposure in the state, it said.
The main impact could be in the form of accretion in new derailments and the increase in credit costs (especially for SMEs / MSME / retail trade) together with a weakening of the credit growth profile.
Emkay Global lists five such stocks that are likely to suffer the most from the flooding in Kerala:
Federal Bank remains the biggest risk due to this unforeseen event with 34 percent of lending and 64 percent of deposits directly tied to the state.
62 percent of the deposits in Kerala are contributed by the bank's NFI customer base. Out of a total of Kerala-based credit portfolio, 51 percent is focused on companies, 28 percent on SME / MSME and 21 percent on the retail segment.
Emkay expects the rising risk of default in all these segments to cause a potential delay in recovery and a peak in credit costs.
South Indian Bank:
South Indian Bank is another bank in Kerala with a total loan portfolio of 41 percent for the state. Of this credit in Kerala, 42 percent of the exposure to SMEs is still at greater risk.
For Muthoot Finance, specific exposure to the state is not made public. But fifteen percent of the office network for Muthoot Finance is located in Kerala, with 50 percent of the lending budget that Southern states have contributed.
For Manappuram Finance, 15 percent of the Gold Loan offices and 7 percent of the MFI offices are located in Kerala. On a mixed basis, 52 percent of the total credit portfolio is also contributed by southern states.
National bank of India:
Among large banks, the State Bank of India (SBI) would have significant exposure, as one of the merged associated banks, State Bank of Travancore (SBT), came from the state with significant exposure to direct agriculture and related sectors.
Under private banks, we would remain relatively concerned for HDFC Bank, given their healthy exposure to Agri
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