Amid slowdown in the domestic automotive industry, ratings agency ICRA in its latest report has said that demand slowdown would curtail tyre industry's revenue growth to 3-4% in current financial year (FY20), and margins are expected to decline. It mentioned that the credit profile of Indian tyre industry may weaken in current fiscal affected by the ongoing slowdown in the domestic automotive industry, rising raw material (RM) prices and higher spend towards debt-funded capacity expansion.
It pointed out that subdued vehicle production due to weak consumer sentiments amidst slowing economic activities, the rising cost of vehicle ownership and softened rural demand will impact the tyre demand in FY20. However, it stated the long-term outlook on industry credit profile is stable.
The industry revenue growth is projected at 6-8% with operating and net margins at 12-13% and 4-5 percent respectively, in the period FY20-24. The industry capitalisation and coverage indicators are likely to remain comfortable over the long-term, although some moderation is expected in FY20/21.