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MOTORINDIA
l
March 2012
97
are thus forging alliances with glo-
bal peers in order to enhance their
product offerings. The global com-
ponent manufacturers are also keen
to get a foothold in the Indian auto
sector to overcome the stagnation in
their home countries.
The capex plans of domestic auto
suppliers are significantly large in
relation to their own internal cash
generation. An important point to
note is that investments in this sec-
tor did not slow down in the past
even in the downturn years as most
OEMs and auto component suppli-
ers are taking a long-term view of
the Indian market.
Fitch notes that the funding mix
is critical in the current situation
where auto suppliers have to under-
take capex towards product expan-
sion to weather slower growth in
auto volumes. Many domestic auto
suppliers have raised funds from
private equity to support their ex-
pansion plans on top of the financial
assistance from the collaborators.
Though the trend of private equity
infusion will continue in 2012 on
account of the sector’s growth pros-
pects, the agency expects that bor-
rowings would also increase for the
majority of domestic auto suppliers
to fund their capex plans. However,
this would not likely affect the credit
metrics of the suppliers as they are
expected to be broadly in line with
their current ratings.
w
market outlook
Besides the collaborative
approach, many large do-
mestic suppliers are un-
dertaking such expansion
through the acquisition of
smaller suppliers in do-
mestic and global markets.