Impact of Recent Floods in Chennai

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News Update

December 2015

Impact of Recent Floods in

Chennai


Event Summary

Chennai has been receiving heavy rainfalls from November onwards, with the 1,218.6 mm of rainfall received in No-

vember being three times more than normal. In the 24 hours beginning 1st December, the city received 330 mm of rain,

which was greater than the amount of rain the city receives for the entire month of December.

The resulting floods from the heavy rainfall have led to large areas of the city to come to a complete standstill, with

nearly half the electrical supply being cut off and telephone and transport services severely impacted.

Close to a million people have been displaced from their homes and the death toll reaching 280 since the rains first

began in November.

Impact of the Floods

Effect on Logistics:

Heavy rainfall and the resulting floods have had a major impact on transportation to and from Chennai, with disrup-

tions to air, road and rail transport.

Operations at the Chennai port, especially in the container segment, were disrupted. The movement of containers has

been stopped as of 4th December until further notice.

According to the Port of Chennai authorities the disruption is expected to have “a cascading impact for a prolonged

period even after the floods are over”.

Operations at the Chennai Airport were restarted from 7th December following its shutdown from 2nd December owing

to the flooding and water-logging of runways. Authorities re-opened the airport for 24-hour domestic and international

flight operations

Effect on Industry:

Chennai is home to over 165 Bombay Stock Exchange (BSE) - listed companies with a total market capitalization of over

USD 42.6 billion.

Some of the major industries impacted by the rains are Information Technology (IT), automobile manufacturing, auto

components, etc.

Initial estimates suggest that the financial losses from the torrential rains and floods in Tamil Nadu may exceed USD 2.2

billion.

Impact of Recent Floods in Chennai - 08 December, 2015



Other Sectors Affected:

Natco Pharmaceuticals suspended operations at its active pharmaceuticals ingredient (API) plant located in the Manali

Industrial area in Chennai due to flooding caused by the rains. The facility is owned by a subsidiary of Natco and manu-

factures oncology related APIs.

The company however does not expect the temporary shutdown to impact or impair its pipeline launches from the

plant.

Ambattur Industrial Estate, an industrial hub in the city, is also facing manufacturing disruptions due to the heavy rains.

The estate houses close to 2,400 units, specialising largely in automobile components, but also in garments and engi-

neering products, all of which are shut down due to the rains and resulting power shortages.

Chennai is also home to many Tier I and Tier II suppliers to major OEM manufacturers. These suppliers have also been

forced to cease production following the floods.

Suppliers are expected to face losses over INR 5 billion (~USD 75 million) due to production loss and also due to equip-

ment damages. Though a timeline to restart production has not been set, operations will be delayed as suppliers wait

for flood waters to recede and also fix equipment flooded by the rains.


Takeaway

From the start of November, Chennai has been impacted by floods caused by torrential rains. The floods have had a

major impact on the day-to-day running of the city.

The heavy rains triggered floods in several areas causing casualties and forced mass evacuation of people.

The major industries impacted by the rains are the Information Technology sector, automobile manufacturing sector

and small and medium-scale engineering industries.

The disruption to the automobile industry is expected to be large with total production loss pegged at USD 0.2 billion

due to loss in both export and domestic sales and also from the shutdown of the components sector. Following the

shutdown, companies like Renault-Nissan and Hyundai have restarted production.

The impact on the IT sector will be small compared to the automobile industry as companies implement Business Conti-

nuity Plans. However the sector could face USD 60 million in losses.

Tier I and Tier II manufacturing facilities are expected to take longer to reopen as companies will be looking to over-

haul machines that have been flooded.

The government has undertaken rescue and rehabilitation measures, with the deployment of army, navy and air force

along with personnel of the National Disaster Rescue Force.

Rescue efforts are underway with transport and other infrastructure facilities coming back online — 90% of the city re-

ceiving power and major roads opened for traffic with buses running again.

More rain is expected to hit Chennai within the next 48 hours due to a twin weather system, including formation of a

new trough. This can be expected to offset both rescue efforts and commencement of industrial operations.



Sources

http://economictimes.indiatimes.com/industry/transportation/shipping-/-transport/chennai-port-flooded-exports-of-

auto-others-held-up/articleshow/50029678.cms

http://container-mag.com/2015/12/07/container-movement-chennai-port-affected-flooding/

http://www.financialexpress.com/article/india-news/chennai-weather-forecast-more-rains-headed-for-tamil-nadu-

puducherry-over-24-48-hrs/175478/

http://www.financialexpress.com/article/industry/companies/chennai-rain-and-floods-cognizant-infosys-tcs-hyundai-

ford-renault-suspend-operations/173665/

http://www.financialexpress.com/article/industry/automobiles/chennai-floods-rains-to-pose-challenge-for-

automakerss-growth-december-2015-sales/173292/

http://www.dnaindia.com/money/report-heavy-rains-cripple-production-in-chennai-units-of-ford-bmw-renault-

2150864

Author:

Unni Damodaran | Senior Research Analyst

Disclaimer: Strictly no photocopying or redistribution is allowed without prior written consent from Beroe Inc. The information con-

tained in this publication was derived from carefully selected sources. Any opinions expressed reflect the current judgment of the au-

thor and are subject to change without notice. Beroe Inc accepts no responsibility for any liability arising from use of this document or

its contents.

For more information, please contact [email protected].


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Impact of Recent Floods in Chennai

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