April Newsletter
April 2024

From Chief Ratings Officer’s Desk

Welcome to our latest newsletter, where we explore the economic landscape and its implications for businesses in the fiscal year 2025. As we delve into the outcomes of the Monetary Policy Committee (MPC) meeting held on April 5, 2024, we find continuity in the policy stance with a maintenance of status quo on both policy rates and stance.

The MPC's decision to keep policy rates unchanged, despite the dissenting vote for a 25-bps cut, underscores the Committee's commitment to address elevated food inflation levels and durably temper headline CPI inflation to 4%. This reaffirms the likelihood of monetary easing remaining highly unlikely in the near term, aligning with broader economic objectives.

In the automotive sector, the electric vehicle (EV) segment emerges as a significant area of growth, propelled by government support, enhanced awareness, and increasing product launches. With the electric vehicle penetration reaching 4.7% in FY2024, the sector is poised for further acceleration, particularly in the electric two-wheeler (2W) segment. Factors such as improving product portfolios, expanding charging infrastructure, and declining battery prices are expected to drive this growth over the medium term.

Conversely, the domestic Mining Construction Equipment (MCE) industry is projected to witness a decline in volumes in FY2025 after two years of robust growth. The slowdown in new project award activity, owing to the Model Code of Conduct during the Parliamentary Elections, is expected to drive this reversal in growth trend. ICRA forecasts a contraction in aggregate revenues for sample set companies and a decline in operating margins in FY2025.

However, the road execution sector presents a contrasting outlook, with a projected growth of 5-8% in FY2025 following a robust expansion in FY2024. Supported by a healthy pipeline of projects and increased capital outlay by the Government of India (GoI), road execution is expected to rebound after being impacted by the prolonged monsoon in certain geographies during H1 FY2024.

As we navigate through these economic currents, our newsletter serves as a compass, offering insightful analysis, forecasts, and updates to guide your strategic decisions. We invite you to explore the pages ahead, where we unravel the complexities of the economy and offer perspectives to navigate the evolving landscape.

In conclusion, we extend our gratitude for your continued support and engagement. We remain committed to providing timely and relevant insights to empower your endeavors in an ever-changing economic milieu.

Best Regards

K. Ravichandran
Chief Ratings Officer, ICRA Ltd.

Neetika Shridhar

Neetika Shridhar

Assistant Vice President, ICRA Limited

State Government Auction calendar for Q1 FY25 - Key Highlights

Madhura Nejjur

Madhura Nejjur

Assistant Vice President, Research & Outreach ICRA Limited

Geopolitical tensions impacting Indian macros and sectors

ICRA Research Updates
April 2024
Indian Automobile Industry: Two-Wheeler Monthly Report
Geopolitical Tensions: Widening of conflict in Middle East could have macroeconomic and sectoral implications; Iranian trade not significant for India
State Government Finances Sector: Cut-off of SGS rose to 7.50%, highest since Feb 2024, despite lower than indicated issuance

Please click here to check out the video on the ICRA's Research Offerings.

ICRA in News
April 2024
The Times of India, | 24th April

Indian EV component mkt projected to exceed 150k cr by 2030, says ICRA

NDTV Profit, | 18th April

Construction, Mining Equipment Volumes May Drop This Fiscal: ICRA

Business Standard, | 25th January

ICRA revises credit growth estimates to 14.9-15.3% in FY24

Upcoming Events
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Aditi Nayar

Aditi Nayar

Chief Economist, Head-Research & Outreach, ICRA

Monetary easing unlikely in the near term

The Monetary Policy Committee (MPC) expectedly maintained a status quo on the policy rates and stance at its first bi-monthly policy review meeting for FY2025, which was held on April 5, 2024. The voting pattern on both the policy rates as well as the stance remained unchanged at 5:1 from the previous meeting, with the dissenting member voting for a 25-bps cut and a change in stance to neutral. Overall, the Committee continued to stress on elevated food inflation levels and the need to durably temper the headline CPI inflation to 4%, thereby confirming that monetary easing remains highly unlikely in the near term.

Vinay Kumar G

Vinay Kumar G

Roads & Highway Sector
President and Sector Head, Corporate Ratings, ICRA

Road execution to grow by 5-8% in FY2025 to 12,500-13,000 km

ICRA expects road execution to witness a growth of 5-8% to 12,500-13,000 km, after recording a robust expansion of ~20% in FY2024. The pace of execution in this fiscal will be supported by a healthy pipeline of projects, increased capital outlay by the Government of India (GoI) and focus on completion of projects by the Ministry of Road Transport and Highways (MoRTH). ICRA noted that road execution had been impacted in H1 FY2024 on account of the prolonged monsoon in certain geographies, which affected productive days, resulting in muted growth during that period.

Shamsher Dewan

Shamsher Dewan

EV Auto Components Industry
Senior Vice President & Group Head - Corporate Ratings, ICRA

Capex for EV components to exceed Rs. 25,000 crore in the next 3-4 years

Spurred by Government support in the form of subsidies, enhanced awareness, and increasing product launches, the electric vehicle (EV) segment in India has seen a significant upturn in prospects over the past two years. A confluence of factors such as improving product portfolio, charging infrastructure, and financing availability and a gradual decline in battery prices are likely to aid in the acceleration of EV penetration across segments over the medium term. EV penetration reached 4.7% in FY2024, with much of it driven by the electric two-wheeler (2W) segment, although e-three-wheelers (e-3Ws) and electric buses have also contributed to the same.


Ritu Goswami

Mining & Construction Equipment Industry
Assistant Vice President and Sector Head - Corporate Ratings, ICRA

dDomestic mining and construction equipment (MCE) industry volumes likely to decline by 12-15% YoY in FY2025, after a two-year upcycle

ICRA projects the volumes of the domestic MCE industry to decline in FY2025 following two consecutive years of strong growth viz. 26% in FY2023 and 24% in FY2024e1. The reversal in this growth trend will be driven by a slowdown in the new project award activity in Q4 FY2024 and Q1 FY2025, as the Model Code of Conduct will remain in force during the Parliamentary Elections in April-May 2024 (till the announcement of results on June 4, 2024). Additionally, the aggregate revenues for ICRA’s sample set2 companies are expected to contract by 9-12% and operating margins by 100-150 basis points in FY2025.

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