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'High raw material prices, lower sales volume to dent operating profit of tractor makers in FY22'

Crisil also said it expects domestic tractor sales volume to decline 4-6 per cent in 2021-22 amid the volume growth moderating to 0.7 per cent in April-December 2021.

January 28, 2022 / 04:39 PM IST
Representative image

Representative image

Operating profitability of tractor makers is set to shrink by 300-400 basis points in the ongoing fiscal year owing to a sharp increase in raw material prices, primarily steel, along with lower sales volume, ratings agency Crisil said on Friday.

Crisil also said it expects domestic tractor sales volume to decline 4-6 per cent in 2021-22 amid the volume growth moderating to 0.7 per cent in April-December 2021.

In the ongoing fiscal year, Crisil said, prices of key raw materials such as steel and pig iron, which account for 75-80 per cent of total cost, have risen 35-40 per cent year-on-year in April-December and discretionary costs have normalized.

However, despite the resultant decline, operating margin will remain healthy at 15-16 per cent in line with the pre-pandemic levels, it said.