Auto sector outlook remains stable to negative: India Ratings

Tags: News
Ratings agency India Ratings today maintained a stable to negative outlook on the automobile sector for 2014-15 financial year.

The agency expects at base case a 3-8 per cent decline in the passenger vehicle segment which comprises cars, utility and multi-purpose vehicles, while the volume growth in the commercial vehicle (CV) segment is likely to post a 6-9 per cent y-o-y decline in domestic volumes in FY15, India Ratings said in its auto outlook released here today.

India Ratings also said that given the structural issues of over-capacity and intensifying competition it does not envisage the outlook being revised to positive even in the event of a modest volume revival.

"However, curtailment or postponement of planned capacity addition coupled with sales volumes at levels observed in FY11-FY12 could positively impact the credit profile of the sector and result in a stable outlook," it said.

According to the outlook, the financial profile of most industry players is strong despite all segments displaying a y-o-y decline in sales volumes during April-December last year.

The agency had revised the sector outlook in July last year to stable to negative from stable.

Observing that the low leverage (net adjusted debt/EBITDA) of most OEMs provides them the financial flexibility to sustain the on-going economic downturn, the report said, "However, OEMs with limited product and geographic diversification could face further credit profile weakening."

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