Ratings agency India Ratings today maintained a stable to negative outlook on the automobile sector for 2014—15 financial year.
The agency expects at base case a 3—8 per cent decline in the passenger vehicle segment which comprises cars, utility and multi—purpose vehicles, while the volume growth in the commercial vehicle (CV) segment is likely to post a 6—9 per cent y—o—y decline in domestic volumes in FY15, India Ratings said in its auto outlook released today.
India Ratings also said that given the structural issues of over—capacity and intensifying competition it does not envisage the outlook being revised to positive even in the event of a modest volume revival.
“However, curtailment or postponement of planned capacity addition coupled with sales volumes at levels observed in FY11—FY12 could positively impact the credit profile of the sector and result in a stable outlook,” it said.
According to the outlook, the financial profile of most industry players is strong despite all segments displaying a y—o—y decline in sales volumes during April—December last year.
The agency had revised the sector outlook in July last year to stable to negative from stable.
Observing that the low leverage (net adjusted debt/EBITDA) of most OEMs provides them the financial flexibility to sustain the on—going economic downturn, the report said, “However, OEMs with limited product and geographic diversification could face further credit profile weakening.”