Indian tyre industry grows 5.3% in 2011-12: ICRA.

MUMBAI: The Indian tyre industry grew by 5.3% in terms of volumes despite economic slowdown and high input costs in 2011-12, according to rating agency ICRA.

The numbers reflect a decline in replacement demand in terms of volume, subdued OEM demand growth and a healthy export growth. Revenues of the tyre companies recorded a robust 28% growth largely on account of over 20% hike in realisations and the sharp depreciation in rupee which drove export revenues by 46%, said ICRA.

The year 2011-12 started on a challenging note for tyre companies as natural rubber prices peaked at around Rs 240 per kg. The situation, however, improved shortly with natural rubber prices easing to around Rs 195 per kg by November 2011 and stabilising at around Rs 185-200 per kg since then.

Synthetic rubber prices however continued upward, increasing by 30-45% last year. Despite weak demand in the price-conscious replacement markets, tyre manufacturers were forced to push through multiple price hikes of over 20%.

Inability to completely neutralise cost escalations resulted in contraction of operating margins of several players like MRF, Apollo, Goodyear and JK Tyres, by around 180 bps, according to ICRA. Price hikes in the industry continued during the first quarter of 2012-13 in an attempt to neutralise the hike in cost of crude derivatives.

"We expect the demand for tyres from the OEM segment to be relatively muted at 8-9% during 2012-13, despite anticipated revival in replacement volume, driven by vehicles, particularly truck and bus tyres, sold post the recessionary dip of 2009. Revenue growth for tyre companies is also expected to be supported by price revisions of around 5-8% and continued export thrust to SE Asian countries" said ICRA.

Source : economictimes.indiatimes.com