Tyre sector may grow 7-9% in 5 years buoyed by demand,lower crude: ICRA

The Indian

may log 7-9 percent development the next five year backed by favourable outlook for the domestic automotive industry, rating agency ICRA said in a note on December 31.

ICRA, in the note also forecast the industry to see a capital expenditure of around Rs 20,000 crore amid this period.

In addition, the domestic tyre industry margins, which declined by 120 bps year-on-year in the September quarter, are relied upon to enhance in the second 50% of the current financial because of the falling rough costs and stable costs of the natural rubber, it said.

“Tyre demand is estimated to grow by 7-9 percent over the next five years (FY2019-23) supported by favourable outlook for the domestic automotive industry,” ICRA said.

The rating agency additionally said it has a steady point of view toward the Indian tyre industry.

Amidst continued investments towards capacity additions (partly being debt funded), the liquidity position, capitalisation and coverage indicators of the industry players are expected to remain comfortable largely supported by the steady profit and healthy cash reserves accessible with the most of the players, ICRA said in the note.

As per an industry report, the domestic automobile industry, which is right now the fourth biggest on the world, is relied upon to wind up the third biggest by 2021.

The industry (including component manufacturing) is required to develop at an aggravated yearly development rate of 5.9 percent and reach $251.4-282.8 billion by 2026, in this manner turning into the quickest developing industry in the nation, according to the report.

The domestic tyre industry has profited from strong development in original equipment (OE) and substitution sections in the progressing monetary, as indicated by ICRA note.

“While there have been some headwinds like Kerala floods, tightened financing, insurance related regulatory changes impacting two-wheeler (2W) demand, rising fuel and interest costs, among others, the YTD (year-to-date) sales growth across most segments have been robust leading to healthy OE tyre demand growth,” it said.

Substitution tyre demand, particularly in the truck and bus portion, too has recovered sharply in the last one year supported by post-effects of goods and service tax (GST), pick-up in infrastructure activities, and healthy consumption driven demand, it said

Moreover, tyre sends out have been consistently expanding over the most recent one year with recuperation in tire request from overseas markets and rising aggressiveness of Indian tyre creators, both regarding quality and estimating, ICRA expressed.

The tyre industry in the nation has seen huge limit increases in the last decade with a total spend of around Rs 27,800 crore, of which around 70 percent was spent in the last six years.