and Research Pvt Ltd (Ind-Ra) has maintained an improving outlook for the auto
ancillary sector and maintained a stable outlook on its rated portfolio for the
second half of FY22.
Senior Analyst, Ind-Ra, said that the agency expects the sector revenues to
grow 18%-20% YoY in FY22, supported by strong growth in demand from original
equipment manufacturers (OEMs) and the export market. It would also increase by
higher realisations due to a likely rebound in medium & heavy commercial
vehicles (CVs) sales and passthrough of higher raw material prices.
had lowered its FY22 OEMs sales volumes growth forecast to 12%-16% YoY (initial
estimate: 16%-20%), higher exports and improved realisations keep the revenue
growth estimate intact. The agency expects the export demand to be marginally
better, while demand from the aftermarket would provide a steady contribution.
margins would see a 50-100bp YoY contraction due to increased input prices,
supply chain disruptions and semiconductor shortage, despite better operating
leverage. Still, the EBITDA would increase on an absolute basis, and credit
metrics are likely to improve in FY22.
supply chain disruptions have solidified the thrust on localisation for the
sector. While the fine print is awaited on the Production-linked Incentive
(PLI) Scheme, it could create competitive advantages and growth opportunities
for the segment in the medium to long term. Also, the introduction of the National Vehicle Scrappage Policy could lead
to an uptick in demand, especially in the CV segment; although the benefit from
the policy would accrue FY24 onwards.
Source – India Ratings and Research Release