The tyre sector is one of few, whose operating profits are expected to register growth this year, surpasing pre-COVID levels, despite lower volume. Higher realisations and benign input prices will help offset the impact of 4-6% volume decline, and enable a 6-8% growth in operating profits for tyre manufacturers in fiscal 2021.
That, along with phased implementation of capital expenditure plans, will ensure stable credit outlook for tyre manufacturers. This is based on CRISIL Ratings’ analysis of India’s top six tyre manufacturers, accounting for ~80% of the Rs. 60,000 crore automobile tyre sector revenue.
The sector derives 28% of its volume (in tonnage terms) from OEMs, 58% from the replacement market, 10% from exports, and the rest from imports.