Auto component industry's revenue growth to remain weak: ICRA

The domestic auto component industry's revenue growth is expected to remain weak in the near term, as slowdown has hit the automobile industry amidst an uncertain global economic situation, rating agency ICRA said Tuesday.

According to its latest study of 35 listed companies, the overall revenue growth has been weak in fourth quarter of 2012-13 due to the unusually high base of the corresponding period of last year.

The Indian auto components industry's revenue growth in 2012-13 was the slowest in last five years as suppliers faced weak demand from domestic automobile companies, sluggish exports and a tepid replacement market sales.

"Suppliers of parts to the medium and heavy commercial vehicle (M&HCV) segment and the passenger car (PC) segment were the most severely impacted; while suppliers to the light commercial vehicle (LCV) and utility vehicle (UV) segments were relatively better off," ICRA said in a statement.

Apart from the overall slowdown effecting the industry, report also pointed that the auto component manufacturer's profits fell by seven percent due to high levels of depreciation of the Indian Rupee against the US Dollar.

"The profits of auto component manufacturers with foreign currency loans has been weighed down by sharp appreciation of the dollar, resulting in mark-to-market (MTM) losses on restatement of foreign currency loans and higher interest outgo," the report said.

However, the report pointed that the sector in the medium term may see an upswing due to automobile companies' thrust on localisation and auto suppliers' efforts to expand business in new geographies.

On refinancing of loans, the report added that initiatives such as the proposed enhancement of refinancing capability of Small Industries Development Bank of India (SIDBI) as well as the memorandum of understanding (MoU) signed between Automotive Component Manufacturers Association of India (ACMA) and SIDBI are likely to provide support to smaller entities in the automotive value chain.