ICRA, a rating agency, expressed its expectation of a positive demand outlook for the road logistics sector in the fiscal year 2024. This optimism is supported by a steady domestic consumption and investment demand.
ICRA projects that the industry’s revenue will grow by 6-9 percent in FY2024, building upon a strong base from FY2023. This growth is primarily driven by demand from various sectors such as e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods. ICRA further stated that it foresees sector stability.
However, ICRA also pointed out potential risks to these estimates, which could materialize if there is a significant decrease in demand due to high inflation and interest rates, or if global supply-demand dynamics affect the Indian economic landscape.
In FY2024, the industry’s debt coverage metrics are expected to improve slightly compared to FY2023, but operating margins may contract due to inflationary input costs, especially the high prices of crude oil, and debt-financed capital expenditures for vehicle replacement.
ICRA also observed that despite the decline in crude oil prices in the first quarter of FY2024, logistics companies’ operating margins were impacted due to delays in implementing price increases.
