+
Indian road logistics sector set for growth ahead of festive season
ROADS & HIGHWAYS

Indian road logistics sector set for growth ahead of festive season

The Indian road logistics sector is poised for a moderate revenue growth of 6-9% year-on-year (YoY) in FY2025, according to ICRA. Despite some disruptions in business activities during the first quarter due to the General Elections, the sector is preparing for the strong festive period. Increased manufacturing output, restocking, higher consumer spending, and e-commerce activities are expected to boost logistics demand. A favourable monsoon season and the government's focus on capital formation are additional factors likely to support revenue growth. ICRA maintains a 'Stable' outlook for the sector, driven by government measures and policies as well as stable demand from segments like e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods. Organised players are anticipated to maintain a pricing premium amid inflationary conditions, which should support operating profitability in FY2025. However, profitability will likely remain range-bound and below the peak levels seen in FY2023. Debt coverage metrics are expected to remain comfortable, despite some anticipated increase in debt levels due to capital expenditure for new vehicles, an expanding branch network, and technology investments. ICRA projects the interest coverage and total debt/OPBITDA to range from 7.0x-8.0x and 1.4x-1.7x, respectively, in FY2025, compared to 7.6x and 1.6x in FY2024. Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA said, "ICRA’s sample set witnessed modest revenue growth of 4.6% in FY2024 over FY2023. The growth was subdued on account of a relatively muted demand amid high inflation, an uneven monsoon, a relatively lackluster festive season and the rising interest rate regime." "The operating profit margin eased to 11.2% in FY2024 (down ~120 bps from FY2023) on account of rising operating costs (ex-fuel) amid the high inflation levels and stiff competition in the sector. In Q1 FY2025, the revenues grew by ~7% with operating margins of ~10-11%. ICRA expects the industry operating profit margins to remain in the range of 11-12% in FY2025, with the organised players expected to maintain the pricing premium amid an overall inflationary cost scenario," he added. The e-way monthly volumes have shown steady growth over the years and have remained largely stable in the last four months at above 100 million, with August 2024 reporting an all-time high of 105 million. This signifies resilient domestic trade and transportation activities. The monthly FASTag volumes have also moved in tandem with the e-way bills, ranging from 295 to 350 million in FY2024 and the current fiscal year, with an all-time peak of 348 million in December 2023, reflecting business continuity. "Road logistics players also remain exposed to environmental and social risks. Tightening emission control norms necessitate investments in either alternative fuel vehicles or in the current fleet. They are also exposed to litigation/penalties arising from issues related to harmful emissions and waste, which may lead to financial implications and impact reputation. The social risk includes driver shortage, health, safety, and quality of work-life balance for drivers," Krishnamurthy said.

The Indian road logistics sector is poised for a moderate revenue growth of 6-9% year-on-year (YoY) in FY2025, according to ICRA. Despite some disruptions in business activities during the first quarter due to the General Elections, the sector is preparing for the strong festive period. Increased manufacturing output, restocking, higher consumer spending, and e-commerce activities are expected to boost logistics demand. A favourable monsoon season and the government's focus on capital formation are additional factors likely to support revenue growth. ICRA maintains a 'Stable' outlook for the sector, driven by government measures and policies as well as stable demand from segments like e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods. Organised players are anticipated to maintain a pricing premium amid inflationary conditions, which should support operating profitability in FY2025. However, profitability will likely remain range-bound and below the peak levels seen in FY2023. Debt coverage metrics are expected to remain comfortable, despite some anticipated increase in debt levels due to capital expenditure for new vehicles, an expanding branch network, and technology investments. ICRA projects the interest coverage and total debt/OPBITDA to range from 7.0x-8.0x and 1.4x-1.7x, respectively, in FY2025, compared to 7.6x and 1.6x in FY2024. Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA said, ICRA’s sample set witnessed modest revenue growth of 4.6% in FY2024 over FY2023. The growth was subdued on account of a relatively muted demand amid high inflation, an uneven monsoon, a relatively lackluster festive season and the rising interest rate regime. The operating profit margin eased to 11.2% in FY2024 (down ~120 bps from FY2023) on account of rising operating costs (ex-fuel) amid the high inflation levels and stiff competition in the sector. In Q1 FY2025, the revenues grew by ~7% with operating margins of ~10-11%. ICRA expects the industry operating profit margins to remain in the range of 11-12% in FY2025, with the organised players expected to maintain the pricing premium amid an overall inflationary cost scenario, he added. The e-way monthly volumes have shown steady growth over the years and have remained largely stable in the last four months at above 100 million, with August 2024 reporting an all-time high of 105 million. This signifies resilient domestic trade and transportation activities. The monthly FASTag volumes have also moved in tandem with the e-way bills, ranging from 295 to 350 million in FY2024 and the current fiscal year, with an all-time peak of 348 million in December 2023, reflecting business continuity. Road logistics players also remain exposed to environmental and social risks. Tightening emission control norms necessitate investments in either alternative fuel vehicles or in the current fleet. They are also exposed to litigation/penalties arising from issues related to harmful emissions and waste, which may lead to financial implications and impact reputation. The social risk includes driver shortage, health, safety, and quality of work-life balance for drivers, Krishnamurthy said.

Next Story
Infrastructure Transport

Indian Railways Sanctions 237 Projects Worth Rs 1.9 Trn

The Indian Railways has sanctioned 237 projects (including 40 new lines, 17 gauge conversions, and 180 doubling schemes) totalling 9,703 km at an estimated Rs 1.90 trillion since FY23, Minister Ashwini Vaishnaw told Parliament.Additionally, 892 route surveys covering 61,462 km have been sanctioned during this period. The pace of track commissioning has increased, with 34,428 km added from 2014–2025, compared to 7,599 km from 2009–2014.This acceleration is credited to the PM Gati Shakti National Master Plan, which has improved project coordination and reduced costs through better survey met..

Next Story
Infrastructure Transport

Kernex Wins Rs 21 Crore Kavach Safety Upgrade Contract

Kernex Microsystems (India) Ltd has secured a Rs 21.03 crore order from South Central Railways to upgrade the Kavach automatic train protection (ATP) system on the Bidar–Parli Vaijnath section.The contract, awarded to the Kernex–VRRC JV, involves upgrading Kavach from Version 3.2 to 4.0 along the route between Sadashivpet Road and Parbhani. The stations themselves are excluded from the scope.The project is expected to be completed within 24 months. Kavach is India’s indigenous ATP system aimed at enhancing train safety by preventing collisions and signal-passing incidents. ..

Next Story
Infrastructure Transport

MAHSR Corridor from Maha to Sabarmati to Complete by 2029

The entire Mumbai-Ahmedabad High Speed Rail (MAHSR) corridor is expected to be operational by December 2029, Railway Minister Ashwini Vaishnaw informed the Lok Sabha. The Gujarat segment from Vapi to Sabarmati is slated for completion by December 2027.Covering 508 km and passing through Gujarat, Maharashtra, and Dadra & Nagar Haveli, the project includes 12 stations. Japan International Cooperation Agency (JICA) is funding 81% (Rs 88,000 crore) of the total Rs 1,08,000 crore cost, with the rest shared by the Railways and the two state governments.As of June 30, a cumulative Rs 78,839 crore..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?