Following a double-digit decline in FY2020, annual auto component sales (excluding tires) are expected to decline by 16-20% in 2020-21. Mumbai:Performance of auto component makers is expected to remain weak in the second quarter of the current fiscal but is expected to continue to improve significantly, credit rating agency Icrara said on Thursday.Following a double-digit decline in FY2020, annual auto component sales, excluding the tire business, are expected to decline by 16-20% in FY2020-21.

Tire makers are expected to fare better, with sales declines expected to be in the high single digits, the report said.

The auto parts industry has been struggling with weak demand since fiscal 2020, the report said. The industry experienced 16 months of declining sales before the new coronavirus outbreak, which was further exacerbated by the epidemic.

Icra looks ahead and the industry is expected to see strong growth in the 2022 outlook fiscal year, which will improve profitability and coverage metrics for most suppliers.

According to credit rating agencies, most automotive ancillary companies cut accruals in 2014, through 2019 During the fiscal year, in an effort to clean up their balance sheets.

Icra also said 28% of the auto parts portfolios it evaluates are suspended and eligible, but restructuring needs are limited.

“ICRA Ratings said it rates about 28% of the auto parts portfolio as suspended, with 72% of those suspended The company is rated investment grade (BBB rating), primarily for the following reasons. A clear environment preserves cash,” Ikra said.

The Reserve Bank of India (RBI) has allowed companies to suspend debt repayments to lenders and provide liquidity relief immediately after the COVID-19 pop.

The project was completed in two phases from March 2020 to August 2020 in two months. Subsequently, in line with the guidelines of the Expert Committee, the Reserve Bank of India allowed firms to restructure their loans for a maximum of two years only in response to COVID-19 pandemic-related liquidity issues.

Thus, only borrowers with less than 30 days days of delinquency as of March 1, 2020 listed as criteria would be eligible under this framework.

Ray Subrata, senior vice president, Icra Group “The guidance allows lenders to approve a resolution framework for borrowers through restructuring and performance improvement, provided the borrower meets five industry-specific criteria by March 31, 2022 year. “You can do it, ” he said.

Lenders must also comply with the gross external debt/adjusted tangible net worth criteria at the time of implementation, he added.

“Our analysis shows that about 80% of auto component companies in ICRA are rated Needs restructuring.

“However, most companies will not resort to reorganization proceedings. Many of these investment auto parts suppliers are higher up the value chain and have relatively large companies. As a result, while well-qualified, the need for restructuring is limited. “Ray said.

Ikra pointed out that production across automotive segments (except commercial vehicles) continues to grow, driven by pent-up demand. With channel enrichment and gradual liberalization of export markets, most auto component companies were close to (60%) before the outbreak. September 2020-65%)

Credit rating agencies also said. We expect 2022 2022. FY accruals will be significantly higher and the proportion of companies opting for restructuring will be relatively low and largely confined to smaller companies.

Auto component production resumed in the second phase of the embargo. Corporate capacity utilization was not at optimum levels for most of the first quarter of FY2021, the report said, adding that capacity utilization in May and June 2020 was below 30%.