Mayank Agrawal, Sector Head and Assistant VP, Corporate Sector Ratings ICRA Ltd, informed, “Volumes in FY2022, were constrained mainly because of increasing equipment prices both on account of rise in input costs and changes in emission norms (from CEV-III to CEV-IV), muted rentals and extended monsoon-related impediments. The findings of ICRA’s latest survey clearly reflects positive sentiment over the next six months with none of the respondents expecting a decline in volumes. Though, the feedback has been widely disparate across states in terms of growth expectations, majority of the dealers estimate a sub-10% growth, highlighting cautious mood and persistence of uncertainties.”
The survey further, indicates a 10%-20% increase in prices of equipment, mainly due to increasing input cost along with change in emission norms. The equipment utilisation levels moderated primarily due to extended monsoon and its impact on the infrastructure activities. A lower number of respondents, only 64% highlighted a utilization level of over 70 % as compared to 77% respondents during Nov-2020 survey. The rentals continue to remain under pressure. A majority of respondents indicated that inventory holding has come down to up to 30 days, compared to up to 60 days of inventory, pre-Covid. Also, most dealers reported a tighter lending environment, with loan to value (LTV’s) reduced by 500 bps compared to pre-Covid era for the first-time buyers (FTB) segment.
Agrawal added, “ICRA’s outlook on the mining and construction industry continues to remain stable, with expectations of a pick-up in demand following continued thrust on infrastructure by the GoI in the Union Budget 2022-23. Nevertheless, tightening of LTVs by financiers, muted rentals and continued increase in equipment prices poses downside risk to demand estimates.”
