representative image new delhi with the rapid rise in vehicle sales the indian auto components are expected to see a second straight year of double digit growth of about 1416 in fy23 rating agency crisil has reported notably in the previous fiscal the sector clocked about 24 growththe rating agency has noted that the operating margin will be stable at 1213 due to better capacity utilisation and the passing on of the higher input costs to customers with a lag improved demand outlook across segments will drive a 30 rise in capital expenditure which will be funded partly through debt and the balance through higher accruals generated advt the report is based on an analysis of 220 automotive component entities rated by crisil ratings these companies account for about onethird of the sectors revenue of inr 42 lakh crorethe segment derives about 61 of its income from automobile original equipment manufacturers oems 18 from the aftermarket and the remaining 21 from exportsaccording to pushan sharma director crisil research demand from oems should increase by 1820 this fiscal driven by higher production of commercial and passenger vehicles pvs aftermarket demand is expected to grow 79 on a high base of the previous fiscal which benefited from a prolongd vehicle replacement cycle amid the pandemic and component exports will rise 810 on top of about 40 growth in the previous fiscal due to steady demand from the us and european markets he saidthere has been a sharp increase in input prices primarily of steel and aluminium over the past 18 months the impact on operating profitability has however been somewhat muted as the bulk of the input cost increase has been passed on to oemshigher operating leverage and moderation in steel prices from june 2022 due to the recent imposition of export duty on many steel products including automotive grade steel will help buttress the impact of rising freight costs this will ensure operating margin remains stable at 1213 this fiscal though still below 14 achieved in fiscal 2019 which was among the better years for the sector advt capex by crisilrated automotive component makers is expected to see a significant stepup of 30 this fiscal driven by strong demand outlook including for electric vehicles and investments related to the productionlinked incentive scheme working capital should also increase due to higher cost of inventory caused by elevated commodity prices but higher operating profits would nevertheless support healthy debt metrics leading to stable credit outlook for players the debt to ebitda ratio of automotive component makers is estimated at 2 times and interest coverage ratio 67 times in fiscal 2023 almost similar to last fiscal naveen vaidyanathan director crisil ratings saidthe persistent semiconductor shortage which can derail growth in pvs in particular the intense waves of the pandemic and inflationary headwinds in key export markets need watching the rating agency saidauto ancillary sector revenues to grow by 810 in fy23 icrathe rating agency expects the sectors coverage metrics to remain comfortable