Tyre Industry To See Margins Under Pressure As Growth Resumes: CARE Ratings

The tyre Industry will see margins under pressure while growth resumes, CARE Ratings has said in its latest report.

"Rebound in the automotive sector, surge in pent-up demand for tyres, buoyant exports and restrictions on tyre imports would fuel the growth of the tyre industry in FY22. CARE Ratings believes that after posting weak performance in April and May 2021, tyre industry is expected to bounce back in Q2FY22 with unlocking of travel restrictions across states," the ratings agency has noted.

The Q1FY22 performance overall would be weak, but with strong demand recovery in subsequent quarters driven by original equipment manufacturers (OEMs) as well as replacement segment, CARE Ratings expects the industry to register 6-8% volume growth for the year.

"Growth would be contingent to rapid Covid vaccination drive, absence of third wave of COVID 19 and normalcy in economic activities, improving consumer sentiments and demand. However, rising raw material (RM) cost is likely to dent operating margins which remains exposed to global price movements of natural rubber and crude derivatives such as carbon black and synthetic rubber. CARE Ratings believes EBITDA margins for industry would be 12- 14% for FY22 (lower as compared to 16.34% recorded in Q4FY21) due to impact of higher raw material costs," it noted.