Omicron to Impact Auto Component Industry's FY22 Revenue Growth: ICRA

The ongoing Omicron wave will impact the growth of Indian auto component industry's FY22 revenues on a year-on-year basis, said credit ratings agency ICRA.

Besides, delayed recovery in semi-conductors and muted two-wheeler demand will also impact the revenue growth of the industry in FY22, it said. Besides this sector specifically the stock markets are also behaving strangely under the influence of Omicron.

The ratings agency's growth forecast for FY2022 has been revised downward by 200 bps to 15-17 per cent from the earlier estimates.

However, healthy demand from domestic OEMs as well as replacement market, and robust exports will bring in some stability thr the revenue stream.

"ICRA expects a 15-17 per cent revenue growth in FY2022 for the Indian auto component industry, driven by domestic OEM, replacement, export volumes and pass-through of commodity prices," said Vinutaa, Assistant Vice President and Sector Head, ICRA.

"The healthy volume growth would, however, come on a low base of FY2021. There could be a downward bias to our estimates in case of prolonged lockdowns or significant demand slowdown because of the Omicron wave."

According to the agency, most domestic OEMs' sub segments are expected to register healthy volume growth in FY2022, albeit on a low base of the last fiscal.

However, certain segments like 2Ws and buses will be impacted by the Omicron wave.

"We expect delayed recovery in the 2W segment because of affordability and dampened sentiments. Also, demand for buses is expected to be impacted during the upcoming school season for the third year in a row," the agency said.

"Supply-chain issues could prolong further as well. Easing of Covid 2.0 related lockdown restrictions and improvement in personal mobility, healthy freight movement and pent-up demand arising from deferment of purchases last year, supported replacement sales for auto components in Q2 and Q3 FY2022."

Additionally, the agency said that while there could be some impact on mobility because of the ongoing covid wave, freight movement and deferment of fresh vehicle purchases will result in healthy replacement demand in Q4 FY2022.