Inc1a3c884-6836-48a5-ac09-1e17a1f39f1b_TempSmalldian tyre industry is expected to perform well in the financial year 2015-16. The credit metrics of the industry is likely to remain strong according to ICRA analysts. While the industry-wide revenues are estimated to grow by 7 to 8 per cent during FY16, up from 5.8 per cent during the 2014-15 financial year, ICRA analysts are of the opinion that the demand for tyres is expected to grow on the back of recovery seen in the Medium & Heavy Commercial Vehicle (M&HCV) segment. Drawing attention to the growth in domestic tyre demand by 10 to 12 per cent during 2014-15, supported by 7 to 7.5 per cent growth in the Original Equipment Manufacturer (OEM) segment, and a 12 to 15 per cent growth in the replacement segment, ICRA analysts claimed that the demand growth was partly affected by the sharp rise in tyre imports (up 19 per cent YoY) and falling exports (down 3 to 6 per cent YoY) in 2014-15. While the recovery in M&HCV segment is expected to continue, stability in passenger vehicle segment and strong prospects for the scooter segment are also expected to drive tyre industry growth during FY16. Expecting domestic tyre demand growth in the region of 4 to 8 per cent over the next three financial years, ICRA analysts reasoned that export challenges are due to subdued global demand conditions. They also drew attention to profit margins reaching all-time highs in the recent quarter ending March 2015 as softer Natural Rubber (NR) and crude oil prices continued to favour the domestic tyre industry during 2014-15. Many tyre companies invested in capex to stay competitive and achieve product diversification. Companies are expected to continue investing, converting under utilised bias-ply capacities to radials and speciality tyres. Some correction in profit margins is expected in favour of a sustainable long-term conduct with contraction in NR supply gap (due to higher consumption) and demand driven inflation.

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