Partial relaxation by Supreme Court will fail to provide meaningful respite to automobile dealers: ICRA

Our Bureau Mumbai | Updated on March 31, 2020 Published on March 31, 2020

An automobile dealers' body expects demand to revive with the even spread of the monsoon and improved liquidity.

FADA had filed a petition with the Supreme Court seeking a two month extension in the deadline for the liquidation of BS-4 stock till May end

The Supreme Court’s decision on March 27, permitting vehicle retailers to sell 10 per cent of the unsold BS-4 vehicles within 10 days of the current lockdown getting over (except in Delhi-NCR), will not provide any material respite to the industry participants, credit rating agency ICRA said in a release on Tuesday.

The credit profile of industry participants will remain under pressure over the next two quarters, it said.

“Downgrades exceeded upgrades during FY2020 - An analysis of over 58 automotive dealerships rated by ICRA reveals connection between market share trend of OEMs and their dealerships credit profile. It has been observed that dealerships across segments (two-wheelers, passenger vehicles or commercial vehicles) have witnessed stress on their capital structure owing to higher inventory level and low demand,” it said.

However, amongst various automotive segments, dealerships of larger PV OEMs like MSIL and Hyundai have generally demonstrated stable credit profile as compared to their M&HCV or construction equipment (MCE) counterparts, which have been reeling under sharp slowdown in the domestic market, it noted.

FADA had filed a petition with the Supreme Court seeking a two month extension in the deadline for the liquidation of BS-4 stock till May end, which was heard by the court on March 27.

BusinessLine had reported on March 25 that BS-4 stock to the tune of seven lakh two-wheelers, 12,000 passenger vehicles and 8,000 commercial vehicles remain unsold at dealerships across India amid the coronavirus pandemic that led to lockdowns and closure of non-essential businesses.

Published on March 31, 2020

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