Auto Components to Grow by 20-23% in FY22: ICRA

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Auto Components to Grow by 20-23% in FY22: ICRA
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By Aditya Raghunath -- Rating agency ICRA Ltd (NS: ICRA ) has forecasted that the Indian auto components industry will grow at 20-23% for FY22.

"For the full year FY2022, we expect a revenue growth of 20-23 percent aided by growth across segments and commodity pass through, albeit on a low base. However, headwinds such as sharp increase in commodity prices, supply chain disruptions partly arising from semiconductor shortage and premium freight expenses are expected to weigh in industry margins in FY2022, partially offsetting benefits arising from improved operating leverage," said ICRA Vice President and Sector Head Ashish Modani.

ICRA said that commodity prices will remain high for the first half of FY22 before falling in the second half. However, headwinds such as high air freight shipping will remain for the industry. "Despite the strong revenue growth and consequent benefits from operating leverage expected, these headwinds are expected to weigh in on margins," ICRA said.

ICRA added that auto component companies are likely to spend on CAPEX but they will be cautiously optimistic. "The incremental investments will be primarily towards capability development i.e. new product additions and committed platforms, unlike the investments towards capacity expansion witnessed in the past,” said Modani.

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