REVIEW AND OUTLOOK OF TOOL ROOM AND MOULD BASE MARKET IN INDIA

Industry to gradually pick up pace from fiscal 2022, post decline in fiscals 2020 and 2021

A tool room is integral to the manufacturing sector, and, hence, its fortunes are closely linked to the trajectory of
the various industries.

The tool room industry is estimated to have grown at 6-7% CAGR between fiscals 2017 and 2019, supported by
a 10% CAGR in demand (domestic + exports) from its primary segment, i.e. automotive, and 6% CAGR from
consumer appliances. In fiscal 2020, though, demand from the automobile sector dropped ~15% on-year amid
slowing economic growth, weak rural demand, price hikes of vehicles because of Bharat Stage-VI upgradation,
increase in road tax in certain states, liquidity constraints resulting in lower loan-to-value, as well as the
nationwide lockdown in late March. Consequently, the tooling industry’s market size fell 8-10% on year, to Rs
150-155 billion. Continued growth in consumer appliances demand of 5-6% even in fiscal 2020 restricted a further
decline.

Consequently, the share of the automotive segment in the industry-wise demand pie shrunk from 64% in fiscal
2017 to 61% in fiscal 2020. On the other hand, the consumer appliances industry’s share rose from 7% to 9%,
with the plastic products industry maintaining its share of 12-14%.

Industry-wise demand share in fiscal 2020

Market size: Rs 150-155 billion
Plastic

processing,
13%

  
   

Automotive,

61% Consumer

appliances, 9%

Electricals, 6%

Packaging, 4%
Others, 7%

Note: Others include General engineering, medical equipment, railways, defence, mining equipment, etc.
Source: Tool and Gauge Manufacturers Association, CRISIL Research

In fiscal 2021, the Covid-19 pandemic severely affected the economy as well as the manufacturing industry. The
61-day nationwide lockdown and gradual unlocking impacted customer sentiment and, in turn, underlying demand
for the tooling industry. CRISIL Research expects the tooling industry to contract 12-14% on-year, to a decade
low of Rs 130-135 billion. However, over the next three years, the economy as well as demand for tools are
forecast to gradually pick, with the market size of the tooling industry reaching Rs 185-190 billion by fiscal 2024,
which is a 4-6% CAGR from fiscal 2020 levels; the automotive industry (domestic + exports) is projected to grow
at 2-4% CAGR from fiscals 2020 to 2024. Also, given the rising number of new vehicle launches as well as
increased frequency of launching latest modified versions of popular models, demand for newer tools and moulds
is expected to outpace the automobile industry’s demand, thus providing further thrust to the tooling industry.
Demand from opening up of industries such as defence and aerospace, with conditions for local sourcing of
components, is also expected to provide additional surge to tooling demand.

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