1 min read.Updated: 17 Jul 2021, 12:30 PM ISTLivemint
India’s two-wheeler manufacturers will witness volume growth of around 10%-12% in the current fiscal (FY22) compared to the earlier estimate of 18%-20% due to the devastating impact of the second wave of covid infections and higher channel inventory, rating agency Crisil said
NEW DELHI: India’s two-wheeler manufacturers will witness volume growth of around 10%-12% in the current fiscal (FY22) compared to the earlier estimate of 18%-20% due to the devastating impact of the second wave of covid infections and higher channel inventory, rating agency Crisil said.
This volume growth would come on a low base after a decline of 13.2% in fiscal 2021 (FY21) and 17.2% in fiscal 2020 (FY20) . However, overall revenue growth will be higher on account of calibrated price hikes by two-wheeler makers in the last quarter of FY21, as well as FY22 to offset rise in input costs, the rating agency noted.
Credit profiles of two-wheeler makers will remain healthy owing to higher revenues, almost stable operating margins, healthy cash surpluses, and strong balance sheets, according to Crisil analysts.
“Though forecasts of normal monsoons in the impending season bode well for the rural segment, higher rate of covid-19 infections in rural areas will impact income levels and constrain offtake, for most of the first half of fiscal 2022. Moreover, unlike during the first covid wave, channel inventory for the industry was higher at 40-45 days in April 2021 compared to 20-25 days in April 2020 due to BS VI transition. Hence, benefit of channel filling will not be available this fiscal, as the impact of the covid wave abates from Q2 of current fiscal, resulting in lower growth," said Gautam Shahi, director, Crisil Ratings.
The rating agency also noted that motorcycle volumes will see higher moderation. Around 70-75% of these are sold in rural areas, compared to scooters which are a predominantly urban product. Among domestic two-wheeler segments, growth of rural focused executive and economy motorcycles will remain constrained at 9-11% (as shown in annexure) in FY22.
The scooter segment is expected to stage a good recovery this fiscal, registering volume growth of 15-17%, albeit on a relatively low base, supported by faster recovery in urban incomes, continuing preference for personal mobility, and the graded opening up of offices and educational institutes, as vaccination drive gathers pace.