New Delhi
After two years of contraction, the Indian tyre
industry's demand is poised to grow by 13%-15% in the original equipment
manufacturer (OEM) segment this fiscal, according to ratings agency ICRA.
ICRA also said that, the demand would also grow by 7%-9%
in the replacement market segment. Since capex executions have resumed in the
last few months after a hiatus with improving domestic and exports demand, based
on projected demand growth, capital expenditure of over Rs 200 billion is
expected in the tyre industry between FY2022 and FY2025, which would be partly
debt funded.
The demand outlook of the tyre industry remains favourable
and growth in the ongoing fiscal will be aided by a sharp recovery in OEM tyre
demand, lower base effect of FY2021, improving pace of vaccination, continued
preference for personal mobility and healthy rural cash flows.
On the exports front, which constitutes nearly one-fifth
of the tyre industry's revenues, going forward it is expected to be supported
by increased acceptance for Indian tyres. Exports grew by 10 per cent in value
and 8% in volume terms in FY2021 after a marginal contraction in FY2020.
Srikumar Krishnamurthy, Vice President and Co-Group Head,
ICRA, said that, tyre demand has been relatively more resilient compared to
other auto components as the replacement demand in the tyre industry insulates
it from cyclicality to a large extent.
said that with improving domestic and exports
demand, capex executions have resumed in the last few months after a
hiatus. The credit
profiles of tyre manufacturers would be supported by healthy earnings and cash
reserves.
Source: The Times Of India
Image Source: Google Images
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