Tyre makers are likely to witness a 6-7 per cent volume growth over the next three years, largely driven by two-wheelers and tractors coupled with growing replacement sales in the commercial vehicles segment, says a report.
The optimism comes from a likely 9 per cent revenue growth in FY’17 if Monsoon behave the way it has been projected, and 6-7 per cent volume growth, a report by rating agency Icra said.
But it warned that this will not result in better bottomlines as operating margins are expected to contract by 250-300 bps with a modest increase in raw material prices, hike in wages and increased fixed costs with large capacities getting commissioned.
last fiscal saw rising cheap imports pulling down revenue of seven major tyre companies by 2 per cent, led by a 6-8 per cent fall in realisations, despite volume growth of 4-5 per cent last fiscal year.