Ford India's revenue to reduce to less than a fourth in FY22: India Ratings

Ford India’s revenue from operations will crimp to less than a fourth of its FY21 tally, with the announced closure of its automotive operations, according to India Ratings & Research. Ford India’s FY22 revenue is expected to be around  Rs 2,000-3,000 crore, a sharp fall from Rs 13,516 crore in FY21, said the rating firm in a recent report.

The Company's management has indicated that Ford India’s near-term operational performance would likely be in line with initial FY20 earnings. During the year, it had a revenue of around Rs 2,052 crore.

Even as the revenue is set to shrink, the local arm of the Detroit-based automaker still has strong cash and equivalents balance of around Rs331 crore as on September 15 compared to nearly Rs 380 crore in FY21 said the report.

As on September 15, 2021, Ford India’s net debt stood at just over Rs 6,316 crore compared to FY21 tally of nearly Rs 5,230 crore. Seventy per cent of this is in the form of inter corporate loans from its parent, Ford Motor Co.

The company's India management has indicated that its parent will support its India restructuring costs. This is similar to the parent company’s track record of restructuring in other geographies.

Ford India had announced that its parent expects a charge of $2 billion mainly over FY22-FY24, of which cash outflows would be $1.7 billion and the remaining would be non-cash.

India Ratings expects  Ford India's Ebitda (earnings before interest tax depreciation and amortization) margins to improve in the near-to-medium term due to the closure of its lower-margin vehicle assembly operations, which had been affecting the company’s overall profitability owing to low capacity utilization and high competition, especially in the domestic markets. Furthermore, the margins of the restructured entity are likely to be protected by its cost-plus transfer pricing mechanism.

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