New Delhi: Domestic industrial motor vehicle (CV) field volumes are expected to contract by 25-28 for every cent in FY2021, ratings company ICRA said on Thursday while preserving a negative outlook on the segment. The contraction will bring field volumes to least expensive amounts in additional than a ten years.
Though expansion would be optically better in FY2022 at 24-27 for every cent, recovery to field volumes of even FY2017 amounts would continue being some time absent, ICRA said in a statement.
“ICRA continues to maintain a negative outlook for the industrial motor vehicle (CV) segment above the close to-expression, with headwinds continuing from all fronts, be it funding availability, macroeconomic surroundings, regulatory developments or fleet operator health and fitness,” it said.
The scenario has been more aggravated by the rapid distribute of novel coronavirus in India.
Demand headwinds are expected to proceed above the close to-expression, supplied the macroeconomic difficulties in see of the pandemic outbreak, coupled with weakening fiscal profile of fleet operators and major value hikes because of changeover to BS-VI emission norms, it said.
“Additionally, the lockdowns imposed in the country from close of March 2020 have added production constraints to the on-likely established of difficulties,” ICRA said.
The ratings company said the only constrained environmentally friendly shoot visible is the uptick in rural need, which augurs nicely for light CVs segment, whilst capacity to recoup misplaced product sales of Q1 FY2021 continues to be to be witnessed.
“Accordingly, the domestic CV field volumes are expected to contract more by 25-28 for every cent in FY2021, which would bring field volumes to the least expensive amounts in additional than a ten years,” it added.
In general, these headwinds are expected to exert stress on earnings and credit history profile of CV initial machines producers (OEMs), which have witnessed sharp earnings contraction above the earlier 4-5 quarters.
“In certain, the medium and weighty CV (truck) segment would proceed to facial area major need contraction in FY2021. The difficulties linked to freight availability and tension on fleet operators have compounded significantly above the earlier 3-4 months on account of the pandemic outbreak and lockdown imposed to curtail it,” ICRA Vice President Shamsher Dewan said.
Accordingly, he said, “Notwithstanding the sharp contraction of 47 for every cent in FY2020, the segment volumes are expected to contract more by 35-40 for every cent through the existing fiscal.
Recovery above the medium-expression hinges on macroeconomic revival, as nicely as decide on-up in building and mining action, he added.
Furthermore, Dewan said alternative need for new trucks and buses is very likely to continue being muted above the close to-expression, supplied the stress on hard cash flows of fleet operators.
“Sustained and meaningful decide on-up in the overall economy and infrastructure jobs continues to be important for the field fortunes to reverse. In absence of either, we maintain a subdued outlook for the field for the upcoming fiscal,” he added.