ICRA expects domestic tyres demand to grow by 6%-8% during 2014-15

Domestic volumes and export demand to drive domestic tyre industry by 8% (revenues) with lower input costs supporting margins

ICRA expects domestic demand for tyres to grow by 6%-8% during 2014-15, driven largely by the Truck and Bus (T&B), PV and scooter segments. Replacement demand for T&B is also expected to grow as the economic activity in the country revives, thus leading to increased goods movement.

Tyre demand in 2013-14 is estimated to have grown by a muted 1%, largely aided by the two wheeler and tractor segments, even as demand from the LCV and PV segments faltered. This comes close on the heels of a 2% de-growth witnessed by the industry during 2012-13.

On exports front, the ICRA noted that muted growth in tyre exports during 2013-14 and Q1, 2014-15 is due to global demand conditions, while rupee depreciation partly offsets the demand impact.

ICRA expects raw material prices to stay soft. As per the ICRA, lower input costs have benefited the industry as seen in healthy expansion of margins for the industry. As demand catches up over the next 18-24 months, ICRA expects input costs to go up, not just in India but globally. Astute timing of purchases and prudent management of inventory would be critical for sustenance of profitability over the medium term.

ICRA expects the tyre industry to grow by a CAGR of 11%-12% during the next three years (2015-17) with revenues of Rs 623 billion by 2016-17.

For 2014-15, ICRA expects the domestic tyre industry to grow by 8% to Rs 493 billion, supported by 6% domestic volume growth. ICRA expect significantly softer NR prices to trickle down into margins, leading to stable and high operating margins of 13%-14% in 2014-15.

Powered by Capital Market - Live News