A prolonged and crippling auto sector slowdown in India, coupled with industry-specific headwinds will curtail the domestic tyre industry's revenue growth to 3-4 percent in 2019-20 and hurt margins, ratings agency ICRA Ltd. said on Tuesday.
The credit profile of the Indian tyre industry is likely to weaken in 2019-20 due to the auto sector slowdown, rising raw material prices and higher expenditure towards debt-funded capacity expansion, ICRA said in a statement.
"Nevertheless, the long-term outlook on industry credit profile is stable," it added.
According to K Srikumar, vice president and co-head (corporate ratings) at ICRA, after two strong years of growth, 12 percent in FY18 and 14 percent and FY19, the tyre industry's revenue is estimated to grow at 3-4 percent in FY20. This is due to modest growth in tyre demand due to sluggish auto sales and expected moderation in exports, he added.
The domestic tyre demand, in terms of volume, is also estimated to grow at a lower rate of 3-4 percent during FY20 as against 6.7 percent growth in FY19.
"Going forward, the industry revenue growth is projected at 6-8 percent with operating and net margins at 12-13 percent and 4-5 percen, respectively, in FY20-24," Srikumar said. The tyre industry's capitalisation and coverage indicators are likely to remain comfortable over the long-term, although some moderation is expected in FY20/21.
MRF Ltd., Apollo Tyres Ltd., Ceat Ltd., JK Tyre & Industries Ltd. and Goodyear India Ltd. are a few of the listed tyre companies in India.
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