Auto Ancillary Sector set for Massive Growth as Revenue Hits 11% CAGR; Balance Sheet Strengthens Significantly
The Indian auto ancillary industry is poised for a sustained growth trajectory, driven by robust exports and increasing vehicle premiumisation. A comprehensive report released by Equirus Securities details the sector’s past performance, noting that listed auto ancillary firms achieved a compound annual growth rate (CAGR) of 11 per cent during Fiscal Years 2016-2026.The sectoral revenue experienced a monumental increase over this decade. Revenues rose to approximately Rs 5 lakh crore, demonstrating the sector’s significant scale and market maturity.
Decadal Growth Highlights: Exports and Premiumisation Drive Revenue Surge
The industry's expansion is fundamentally tied to its international market presence. The report highlights that exports have more than tripled over the last ten years, establishing themselves as a critical contributor to overall industry growth.This export surge, coupled with rising trends in vehicle content and premiumisation across the automotive space, has provided a strong tailwind for the ancillary sector.
Financial Fortitude: Balance Sheet Improves Significantly by FY26
The report indicates that auto ancillary companies entered Fiscal Year 2027 with their strongest balance sheet position in a decade. This structural improvement signifies greater resilience and stability within the industry ecosystem.Financial health metrics show substantial strengthening across the board. Net debt-to-EBITDA ratio improved markedly, falling to 0.18 times in FY26 from 0.49 times recorded in FY22.
This impressive balance sheet strength is attributed to better working capital management, lower leverage, and stronger operational cash flows witnessed by the firms.
Future Outlook: Diversification Key to Sustaining High PAT Growth
Looking ahead, the Equirus analysis projects substantial profitability growth for the sector. The companies covered are expected to deliver a CAGR of 21 per cent in profit after tax (PAT) during the FY26-28 period.Diversification is identified by experts as one of the most critical drivers necessary for ensuring long-term, sustainable growth within the ancillary market.
High Potential Segments and Performance Benchmarks
The performance across the 52 listed companies analyzed varied considerably despite the sector's collective upswing. However, a majority saw positive momentum, with 28 out of the 52 companies exceeding the average revenue growth rate for the sector.Among specific operational segments, body and glass has been identified as an area holding out particular promise. This segment is estimated to deliver a strong PAT CAGR of 30 per cent during the projection period.
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