Auto component manufacturers are expected to suffer about 15-18 per cent decline in their revenues in FY21 and an average of 100 basis points (bps) in their EBITDA due to sharp contraction in demand over what the industry experienced during FY20, said Brickwork Ratings in a report released on Thursday.
According to Brickwork Ratings, during FY20, the revenues of auto ancillaries declined about 8-10 per cent after a year-on-year (yoy) increase until FY19. The reduction in revenue is owing to the shrinking order book from Original Equipment Manufacturers (OEMs) due to lower automobile sales in the country last fiscal, it said.
According to the rating agency, the auto component makers’ revenue is expected to slip by about 15-18 per cent in FY21 on account of lower income levels and continued weak sentiments.
“BWR (Brickwork Ratings) expects export revenues to decline as well in FY21 as more than 50 per cent of our exports are to markets in Europe, the UK and the US, and demand from these markets is expected to decline amid the Covid-19 outbreak and postponement of model launches or deferment/cancellation of orders,” the report said.
According to the report, auto components players will be affected adversely in the first quarter of the current fiscal and, to some extent, during the second quarter as well.
The rating agency expects a gradual recovery in vehicle sales from the second half of the current fiscal owing to pent-up demand, an improvement in OEMs production activities and the easy availability of credit from financiers.