Tyre demand poised to rise by 7% over three years.
Tyre makers are likely to witness a 6-7% volume growth over the next three years, largely driven by two-wheeler and tractors coupled with growing replacement sales in the commercial vehicles segment, says a report.
The optimism comes from a likely 9% revenue growth in the current financial year if Monsoon behave the way it has been projected, and 6-7% volume growth, a report by rating agency Icra said.
But it warned that this will not result in better bottom-lines 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%, led by a 6-8% fall in realizations, despite volume growth of 4-5% last financial year. This also came on top of a 15% fall in input costs, primarily natural rubber prices in 2015-16, which gave a whopping 470 bps operating margin expansion to 19.1%.