Icra Pegs Tyre Industry to Grow at 8 Per Cent in FY15

Chennai: Rating agency Icra has pegged the domestic tyre industry to grow 8 per cent to Rs 49,300 crore during the ongoing financial year (2014-15).

"For 2014-15, ICRA expects the domestic tyre industry to grow by eight per cent to Rs 493 billion, supported by six per cent domestic volume growth, even as falling raw material prices would pressure tyre companies to pass these benefits in replacement market," the rating agency said in a statement.

The decline in natural rubber and crude oil prices would provide the requisite headroom for passing on some benefits to the consumers, it said.

Despite the pressure on realisations, for 2014-15, Icra expects "significantly" softer natural rubber prices to trickle down into margins, leading to stable and high operating margins, it said.

Tyre demand in 2013-14 estimated to have grown by a muted 1 per cent supported by two wheeler and tractor segments, even as demand from light commercial vehicle and passenger vehicle segments "faltered".

Icra expects demand for tyres to grow by 6 to eight per cent during 2014-15, contributed by truck and bus, passenger vehicle and scooter segments.

The replacement market is also expected to see demand for trucks and bus as the economic activity revives, it said.

On exports, the agency said in 2013-14 it grew by 7.5 per cent largely due to weak rupee and weaker offtake from importers like Brazil, the UAE and Philippines.

In the first quarter of this fiscal year, Icra said tyre exports in value terms was expected to remain flat due to persisting weak demand and stable currency movements.

"As demand catches up over the next 18-24 months, input costs are expected to go up, globally", it said.