While cost pressures are likely to continue in first half of the fiscal year, Icra expects year-on-year improvement of 50-75 basis points in operating margins in 2022-23, with easing of commodity prices and supply-chain issues
While cost pressures are likely to continue in first half of the fiscal year, Icra expects year-on-year improvement of 50-75 basis points in operating margins in 2022-23, with easing of commodity prices and supply-chain issues
Annual revenue of around 49 auto ancillaries is expected to grow 8-10% in current fiscal year from ₹3 lakh crore, rating agency Icra said on Thursday.
The revenue increase is expected on the back of a stable demand and gradual easing of supply-chain issues in 2022-23, it added.
A stable demand from the OEM segment coupled with steadily increasing premiumisation of vehicles, focus on localisation, improved exports potential and EV opportunities (resulting in higher content per vehicle) would translate into healthy growth prospects for auto component suppliers, Icra said in a statement.
While cost pressures are likely to continue in first half of the fiscal year, Icra expects year-on-year improvement of 50-75 basis points in operating margins in 2022-23, with easing of commodity prices and supply-chain issues, it added.
“While the sharp rupee depreciation vis-a-vis USD could impact the cost structure of auto ancillaries with high import dependency, the impact on margins will be driven by the ability to pass through the same,” Icra stated.
Besides, Icra noted that it expects auto-component suppliers to gradually increase their capital expenditure outlay in 2022-23 to 6-6.5% of operating income, translating into ₹16,000-₹18,000 crore.
The incremental investments will be primarily towards capability development, new product additions, and development of advanced technological and EV components, unlike the investments towards capacity expansion witnessed in the past, it added.
“The capex is expected to hover around 7-8% of operating income in FY2024 and FY2025, which is over ₹20,000 crore each for FY2024 and FY2025,” Icra said.
