Ratings of 14 auto component manufacturers have been placed on Ratings watch with developing implications by ICRA. This comes close on the heels of the production lapse being seen at MSIL at Manesar after violent workers wrought havoc causing loss of life and injuries to many. The company has been on lockdown after the incident and this has disrupted production output of many suppliers that have tie-ups with this plant. The original equipment manufacturer has declared a lockout on the plant and this has halted production of models like the: Swift, Swift Dzire, A-star and SX4. 30-35% of the production volume at MSIL is taken up by these four variants.
Due to the lockout on this plant, several ICRA rated auto suppliers will experience a drop in cash accruals which will thereby cause certain financial problems for them. Development of these issues has forced ICRa to place the ratings under 'Ratings watch with developing implications'
As Maruti Suzuki India Ltd is the largest OEM in the country, lapses in productivity tend to hit suppliers very badly. This type of situation was also experienced in 2011-12 when problems caw lapse of production at both manufacturing plants (Manesar and Gurgaon). Lower profits and cash accruals were experienced by a number of supplier vendors during that time period.
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