Steep decline in operating profits of suppliers as per rating agency ICRA

Rating agency ICRA in its latest study estimates auto component suppliers to witness an over 70 per cent decline in operating profits during the first quarter of the current financial year (Q1FY22).

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Largely blamed on the second wave and associated lockdowns, the study expects challenges to be further compounded by the sharp increase in commodity prices. These price burdens are known to be passed on to the Original equipment manufacturers (OEMs) with a three to six-month lag. The study allayed fears by stating how most investment grade auto component suppliers are maintaining adequate liquidity to help them sustain and ensure continuity. Retail sales on the decline sharply during the last two months are said to indicate an inventory build-up in the syst