New Delhi
ICRA Limited
stated that the Indian component industry will see a 20-23% growth in FY22
buoyed by good demand in exports. It added that the Indian domestic, as well as
aftermarket, will improve leading to good growth.
The credit
rating agency noted that the commodity prices are expected to remain at
multi-year highs in H1 FY22, before softening in H2 FY22. Even the profit
percentage of commodities like tyres will go up and a YoY improvement of 50-75
bps can be expected. It added that the sharp rise in commodity prices will keep
the marginal expansion in check. ICRA expects the credit profile and liquidity
position of auto ancillaries to remain largely stable in FY22.
ICRA warned that
chip shortages, slow vaccination roll-out, logistic challenges and
lockdowns/curfews, if any, could be demand dampeners going forward. This is
applicable for our market while the exports will be largely unaffected. The
recovery of the Indian market will be slower when compared to Europe or North
America.
Indian component
makers reported good export numbers but the Indian auto industry, as a result of multiple
lockdowns, has suffered because of non-operational plants and the reduction in
the number of vehicles being produced and bought.
Ashish Modani,
Vice President and Sector Head, ICRA Limited said that the COVID-19 second wave
put a temporary pause on the auto component industry’s recovery prospects in Q1
FY22. The aftermarket sales were also impacted for 4-6 weeks. The industry’s
revenues declined by 30%-40% on a QoQ basis, despite support from exports.
He added that
ICRA expects revenue growth of 20-23% for FY22. However, a sharp increase in
commodity prices, supply chain disruptions arising from semi-conductor shortage
and premium freight expenses are expected to weigh in industry margins in
FY2022, partially offsetting benefits arising from improved operating leverage.
Source – Express Drives
Image Source: Photo by Robin Glauser on Unsplash
Also Read:
https://www.automotiveproductsfinder.com/news/icra--demand-for-tyres-set-to-grow-in-india/134760
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