The Kerala rain and flood situation has impacted the tyre industry stocks adversely. Ever since heavy rain started in the southern state from August 1, the rubber output is seen taking a hit. Rubber is a key input used to manufacture tyres.
Kerala accounts for 85% of domestic rubber production in the country. Due to fall in the rubber output, margins of tyre makers such as MRF, JK Tyre, Apollo Tyres and Ceat are likely to be impacted.
CM Pinarayi Vijayan said Kerala received 788.6 mm rain compared to the average 287.5 mm between August 1 and August 19.
Since August 1, the Apollo Tyres stock price has fallen 11%. From 291.60 level, the stock has fallen to 259 level currently.
On August 20, 2018, Apollo Tyres said the production operations of the company's plants located at Perambra and Kalamassery, Kerala have been disrupted due to floods in Kerala. The production loss due to this natural calamity is 1500 MT (approximately) till today. However, consequential loss of profit is not significant. The natural calamity is adequately covered under the Insurance Policy of the Company.
The stock of another leading tyre manufacturer MRF is trading 6% lower since August 1.
It has fallen from 79,578 level to the current 74,533 level on the BSE.
Rubber output in India, the world's sixth-largest producer and second-largest consumer, is likely to fall 13.5 percent from a year ago to 600,000 tonnes in the fiscal year to March 2019, according to N Radhakrishnan, a dealer and former president of Cochin Rubber Merchants Association.
"In July rubber production was hit by rains. Now with the situation worsening in August, farmers again cannot tap rubber trees," Rajiv Budhraja, director general of India's Automotive Tyre Manufacturers' Association, told Reuters.
With industry officials saying that a quick rebound in local rubber output is unlikely, tyre makers like MRF, JK Tyre, Apollo Tyres and Ceat will have to rely more on imports.
That could lift India's imports to a record 500,000 tonnes due to high demand from tyre makers, Budhraja said.