Despite this volume recovery, however, the capacity overhang in the CV sector is likely to continue and could intensify the pricing pressure for original equipment manufacturers, it said.
"We expect the MHCV segment will report volume growth of 13-17 per cent y-o-y in FY'16 to be backed by higher growth in the second half than in the first half. This is based on the agency's expectation of stronger recovery in industrial activity in 2HFY16," India Ratings & Research said.
The industry capacity utilisation in case of CVs last fiscal was around 50 per cent of the estimated capacity of 1.4 million units. Despite the estimated recovery in volumes in FY'16, utilisation levels are likely to reign in the range of 45 to 50 per cent in case of CVs.
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Given the structural issues of overcapacity and intensifying competition, it does not envisage a positive outlook revision in the event of a modest revival in sales.
However, the curtailment or postponement of planned capacity addition coupled with sales volumes equal to those in FY11-FY12 could have a positive impact on credit profile of the sector, Ind-Ra said.
A negative outlook revision could result from sales revival for MHCVs witnessed thus far in 2014-15 not being sustained in 2015-16.
Additionally, any external shock pressuring the rupee and the subsequent spurt in the interest rate could impact the economy moderately. This may affect the volumes as well as the credit profiles of auto companies, it said.