Indian road logistics industry to clock high single-digit growth this fiscal: Report

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

The credit ratings agency also expects the demand momentum to continue in FY24, aided by stable domestic consumption and investment demand, ICRA said.

The Indian road logistics industry's revenue growth is pegged at a high single-digit on an elevated base of FY2023, Icra said, adding that the outlook is stable.

The downside risks to the estimates remain from any material tapering of demand due to high inflationary and interest rate regime, 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.

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

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 favourable demand and realisations," it stated.

On a monthly basis FASTag and e-way bill volumes peaked in December 2022, thereafter coming down sequentially 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 per cent, and e-way bill volumes grew by 19 per cent, according to ICRA.

The volumes are expected to remain stable over FY2024, given the expectation of a favourable demand scenario in the near-term, it said.

"ICRA expects the aggregate operating profit margins of the sample to moderate to 12-14 per cent in FY2024, compared to 14 per cent in FY2022. The operators' ability to effect further rate hikes to offset input price increases amid stiff competition remains a key credit monitorable,” said 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 e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods coupled with the industry's paradigm shift towards organised 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, organised players vis-à-vis their smaller counterparts, there is potential for increased formalisation in the sector going forward, ICRA said.