Indian road logistics industry to register high single-digit growth this fiscal: ICRA

Continuing a stable outlook on the back of an elevated base of the previous year, the Indian road logistics industry is expected to clock a high single-digit growth this fiscal, ICRA said on Monday. 

As per the credit ratings agency, the demand momentum is also expected to continue in FY24, aided by stable domestic consumption and investment demand. 

 The downside risks to the estimates remain from any material tapering of demand due to high inflationary and interest rate regimes, the emergence of any further Covid waves, or a sub-par monsoon impacting the overall economic health, given its strong linkage to economic activity on an aggregate basis, it said.

 The quarterly revenues for the logistics sector witnessed a marginal contraction of 2 percent in Q3 FY23, compared to the earlier quarter of the same year, ICRA said. 

 Following two-quarters of stable demand, economic activity was uneven in the third quarter of the previous fiscal despite robust demand for contact-intensive services and upbeat sentiment during the festive season.

 “We expect the revenues in Q4 FY2023 to be better than Q3, supported by favorable demand and realizations,” it stated.

 In December 2022, FASTag and e-way bill volumes peaked monthly, after which they sequentially came down in January 2023 and February 2023 post the festive season impact.

 On a year-on-year basis, the combined volumes for FASTag for January and February 2023 grew by 24 percent, and e-way bill volumes grew by 19 percent, according to ICRA.

 For FY2024, the volumes are expected to remain stable, given the expectation of a favorable demand scenario in the near term, it said.

 “ICRA expects the aggregate operating profit margins of the sample to moderate to 12-14 percent in FY2024, compared to 14 percent in FY2022. The operators’ ability to effect further rate hikes to offset input price increases amid stiff competition remains a key credit monitorable,”

Suprio Banerjee, Vice President at ICRA Ltd.

 Revenue growth, according to him, over the medium term would continue to be driven by demand from varied segments such as e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods coupled with the industry’s paradigm shift towards organized logistics players, post-GST, and e-way bill implementation.

 Furthermore, multimodal offerings are likely to gain increased acceptance and traction going forward, given that players offering multimodal services had more flexibility.

Given these factors and the relatively higher financial flexibility available to large, organized players vis-a-vis their smaller counterparts, there is potential for increased formalization in the sector going forward, ICRA said.

Leave a Reply

Your email address will not be published. Required fields are marked *