Credit outlook stable for tractor industry: ICRA

Rating agency ICRA said the credit outlook for the tractor industry remains stable, supported by low leverage with healthy liquidity. However, it pointed out that in FY22, margins are likely to be lower than last year’s levels.

Rohan Kanwar Gupta, Vice President, ICRA said that the credit outlook on the tractor industry remains stable. Despite expectations of some margin pressure, operating margins are expected to remain at healthy levels for most OEMs in the industry, with return indicators being strong. OEMs continue to focus on developing new applications. oriented product and emission norms related product launches are in the works.

In line with ICRA’s stable outlook on the industry, the credit profile of OEMs is expected to remain healthy backed by limited credit, healthy cash and liquid investments and limited investment plans.

In addition, the rating agency expects domestic tractor volumes to grow 1-4 per cent year-on-year in FY22.

Earlier, ICRA had projected a growth of 4-6 per cent in volumes for FY22. Keeping in view the effect of second wave, it has been revised to 1-4 per cent.

The agency said that even though uncertainty exists regarding the evolution of the pandemic, the underlying demand drivers for the industry remain intact. Healthy rabi cash flows, continuation of various government assistance programmes, healthy financing availability and a normal monsoon forecast are expected. Help farming sentiments.
In addition to strong agricultural demand, haulage demand has improved significantly over the past few months, led by continued pressure from the government on rural infrastructure development, which is likely to support industry volumes.