Indian tyre makers saw healthy profit growth in quarter - ICRA

ERJ staff report (DS)

New Delhi -- The Indian tyre industry reported a healthy revenue growth of over 25 percent during fiscal 2010-11, according to a quarterly report by Indian finacial analysts, ICRA. On the downside, said the analysts, a surge in input costs especially that of natural rubber (NR) negated any scale benefits, and resulted in a contraction of industry-wide operating margins by over 500 basis points.

ICRA said, "For fiscal 2011-12, while ICRA expects moderation in automotive OEM tyre demand, the strong growth in OEM sales in the last two fiscals is expected to translate into higher replacement demand. Growth in M&HCV replacement demand however could be affected by a slower economic growth. Besides grappling with high input costs and weak demand, domestic players are expected to face additional pressure with the lifting of anti dumping duty (ADD) (with effect from August 2011) on Truck and Bus radials (TBRs) imported from China and Thailand. "

It continued, "The PV segment is the second largest contributor of revenues for the tyre industry, after the M&HCV segment, accounting for around 15 percent of the total revenues. Domestic demand for passenger vehicles has also muted to around 4.0 percent during the first four months of the current fiscal (April-July 2012) after reporting strong growth upwards of 25 percent during the last two fiscals. ICRA expects sapping consumer sentiments owing to high inflation and spiralling interest rates to cap demand over the next quarter also. However, with a number of new product launches lined up for the festive season, demand is likely to improve marginally from Q3, 2011-12. "

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Quarterly report on Indian tyre industry from ICRA