The Indian automotive components sector is projected to experience a revenue growth of 10-12% in fiscal year 2024. This growth will be primarily driven by robust domestic demand from original equipment manufacturers (OEMs), supported by a strong aftermarket. Despite sluggish exports, the sector is expected to maintain its growth momentum.
The revenue from OEMs is anticipated to grow by 12-14% in the current fiscal year, propelled by sustained demand across various segments except for tractors, which achieved record highs in the previous fiscal. The availability of semi-conductors is expected to improve, benefiting the supply of passenger vehicles and premium motorcycles. However, exports, the second-largest revenue contributor, will face challenges due to ongoing headwinds in key markets such as Asia, Africa, and Latin America. On the other hand, revenue from the aftermarket segment is predicted to grow steadily at 6-8% due to strong automotive sales in recent years.
Auto component manufacturers with a significant focus on engine and transmission components, comprising 22% of the sector’s revenue, will diversify their product offerings by enhancing their focus on electric vehicle (EV) components. With the fastest adoption of EVs expected in the two- and three-wheeler segments, these manufacturers will seek to expand their product portfolio accordingly. Additionally, they will prioritize meeting commitments related to the Production Linked Incentive (PLI) scheme and increase their capital expenditures. The total capital expenditure by CRISIL-rated players is estimated to reach approximately Rs 17,500 crore this fiscal year, marking a 20% increase from the previous year. However, strong balance sheets, healthy profitability, and prudent funding of capital expenditures are expected to maintain stable credit profiles.
While interest coverage may marginally decline in fiscal year 2024, it is anticipated to remain comfortable at 7.0-7.2 times, indicating a manageable debt burden. The debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio is also expected to remain stable at 1.5 times.
Looking ahead, the sustainability of demand from domestic OEMs, the indigenization of EV components, and the global macroeconomic scenario will be crucial factors to monitor in the automotive components sector.
