Revenue growth for auto components industry to slowdown: ICRA

MUMBAI: Revenue growth for the Indian auto components industry is expected to slowdown in 2012-13, said ICRA the rating company. "The weakness in overall revenue growth of the auto components industry is likely to persist in 2012-13; yet, EBITDA margins may remain intact or even improve as companies step-up focus on cost control, besides benefitting from a benign raw material cost environment,'' said Subrata Ray, senior group vice president, ICRA.

The industry's planned capex outlay for 2012-13 also remains conservative since a large magnitude of greenfield and brownfield capacity expansion was concluded during the course of the last two years that provides sufficient capacity buffer to meet the level of demand envisaged over the short term," he said.

Domestic demand recovery/ sustenance will be the primary variable that will govern the automobile industry's revenue growth and profitability prospects over the short term, said ICRA. In terms of exports, while the prevailing weakness of INR to USD will not have any material impact on the industry's exports profitability at a broader level - given that exports account for only 15% of the industry's total revenues,''it said.

The year 2011-12 was a melange of events and disparate outcomes for the constituent companies in the Rs1,600 billion Indian auto components industry. The year 2010-11 saw strong demand but trailing capacity build-up. While, in 2011-12 the industry was affected by both demand slowdown as well as supply shocks - consequent to the tsunami in Japan, labour strike at Maruti Suzuki and floods in Thailand - on the growth and profitability score card of a large number of auto component manufacturers.