Road transport operators will see revenue growth this year

27 May 2024 CW Team

According to a Crisil Ratings assessment, revenue growth for road transport fleet operators is anticipated to increase to 9?11% in the current fiscal year 2024?2025. Notwithstanding weak exports, the rating agency's projections are predicated on stronger domestic demand. A higher operating profit is observed due to improved fleet utilisation and stable fuel prices.

Operators' credit profile should also be robust, even if next year will see the implementation of new regulations requiring air-conditioned driver cabins. After three years of significant expansions, operators may choose to scale down on capital expenditure expenditures towards expansion.

According to reports, truck driver cabin air conditioning systems will soon need to be installed by automakers; the implementation is scheduled to start in 2025.

Fleet increases would be limited to 15% of the current fleet size this fiscal year, on a much enlarged base, with the focus now being on the consolidation of operations. Furthermore, should operators choose to modify older cars, the Ministry of Road Transport and Highways' rule requiring air-conditioned cabins for drivers starting in October 2025 would result in nominal capital expenditures.

Furthermore, export-oriented industries account for about a third of the freight demand; these sectors are improving this year after slowing down the previous year, in accordance with economic patterns in the US and the eurozone, India's two main export markets.

Crisil expects growth in volume this year to be driven by freight-intensive domestic sectors, such as mining, industrial, manufacturing, infrastructure and engineering goods. With some of the costs remaining steady, the operating margins of operators are expected to improve to 9.0-9.5 % this year.

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