India Ratings and Research (Ind-Ra) believes the aggressive capacity additions planned by tyre manufacturers in India would impact their credit metrics over FY19-FY21, keeping them above 2.5x-3.0x, as a large part of the capex would be debt-funded. Nevertheless, since the companies’ capacity utilisations have reached peak levels, these expansions are imperative for the players to meet the expected growth in demand and to maintain their market positions. Also, once the capex is completed, the metrics of tyre companies are likely to improve substantially over the subsequent two years, supported by the gradual ramp-up of the new capacities.
Additional information is available at www.indiaratings.co.in.
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