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Auto component industry likely to witness 70% decline in operating profits in Q1FY22: ICRA

23 Jun 2021 Evaluate

Domestic ratings agency ICRA in its latest report has said that Auto component industry is likely to witness a 70 percent decline in operating profits during first quarter of current financial year (Q1 FY22) due to disruptions caused by the second wave of COVID-19. It noted that the challenges for component manufacturers will be further compounded by the sharp increase in commodity prices, which are generally passed through to original equipment manufacturers (OEMs) with a lag of 3-6 months.

ICRA estimates a revenue loss of 30-40 percent quarter on quarter, and this will translate into a sequential decline in EBITDA of over 70 percent during the first quarter for the industry. Exports have come to the industry's rescue in the last few months, when domestic demand nosedived due to lockdown restrictions. Suppliers dependent solely on domestic demand have been the worst impacted.

Despite the short-term headwinds, ratings agency expects the domestic auto component industry to register a 20-23 percent revenue growth in the current fiscal year, supported by double-digit volume growth across most automobile sub-segments and impact of commodity inflation on realisations. It added that the overall industry revenue will still be almost double than the April-June quarter of last financial year.

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