Companies

MRF sees some bright spots amid uncertain growth outlook

G Balachandar Chennai | Updated on August 31, 2020

Rural and export markets provide hope

Tyre maker MRF is seeing some bright spots amid a bleak growth outlook for the automotive and tyre industry due to the disruptions caused by the pandemic.

“We are passing through the most disruptive and uncertain times in modern human history,” KM Mammen, Chairman and Managing Director, said in his communication to shareholders. “The world is enveloped by Covid-19 and no country is free from this pandemic and the resultant economic crisis has aggravated the global community’s hardship. The work culture has changed dramatically across all industries. The tyre industry is also riding this wave of change.”

It has been two months since the government lifted the lockdown and MRF is still finding its way to establish economic levels of production, he added.

The way forward for the automobile industry and the tyre industry is not clear given the uncertainties brought about by the pandemic. The road to recovery will not be smooth given the impact on disposable incomes, consumer behaviour and credit availability, Mammen further said.

Farm, CV demand

However, the ₹16,322-crore MRF sees some bright spots to drive demand in the near term. “Fortunately, the demand for tyres, particularly from the farm and commercial sector, has not been affected much and we are able to cater to these market segments,” Mammen said.

Also, the forecast of a normal monsoon and its timely onset have boosted the expectations of a bumper crop output and this augurs well for the rural economy. This can strengthen rural income and demand, which will see a spurt in demand for two-wheelers and tractors. Thus, a recovery in the rural economy will be a relief to the Indian tyre industry, he added.

The company also said the government’s curbs on the import of tyres was a welcome relief, and would alleviate the domestic industry’s problem to a great extent.

MRF expects to build on the momentum it has created on the export front. The company’s exports grew to ₹1,651 crore in FY20 from ₹1,566 crore in FY19. It attributed the growth to superior product offerings across categories coupled with aggressive focus on channel development across all key markets.

Africa, West Asia, SAARC and some ASEAN countries will continue to drive growth for MRF in the coming years. However, import restrictions and increased regulations in countries like Indonesia and Thailand will act as a dampener to growth, said Mammen.

Published on August 31, 2020

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