The Indian Road logistic sector is likely to witness healthy growth in FY2022 on the back of demand recovery and improved business activities, Domestic rating agency Icra said on Tuesday.
This optimistic lookout is supported by the favorable scenario that has presented itself in recent times, wherein most players reported strong growth in freight volumes on a sequential basis in the second quarter of FY’22, and the momentum is likely to continue in the third quarter of the ongoing fiscal.
A stable outlook was maintained by the domestic rating agency for the Indian road logistic sector.
After a subdued Q1 FY’22 on account of the second wave of COVID-19, demand recovery and improved business activities from Q2 FY’22 onwards, led to better asset utilization, which, along with cost-rationalization measures, supported the operating margins in the current fiscal, Icra said in a statement.
Demand from segments like e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods coupled with an industry paradigm shift towards organized logistics players, post the GST and E-way bill implementation will keep the growth steady over the medium-term.
The sector is also expected to witness some consolidation on account of pandemic-related stress.
However, the threat of a new variant has the potential to derail the momentum of recovery, if it becomes a source of a fresh round of lockdowns/restrictions in the near term.
“With an accelerated pace of vaccine roll-outs, pent up demand, and firm freight rates, driven by high fuel prices, the sector is likely to grow at 13 per cent-16 percent in FY2022 over FY2021.
“Nevertheless, the propagation of the new Omicron variant is a key monitorable, given the sector’s vulnerability to economic activity on an aggregate basis. We expect industry volumes to remain stable in FY2023 as well, with the expectation of steady business activities and formalization of the sector,”Suprio Banerjee, Vice President & Sector-Head, Icra Ratings