Favourable demand sentiments support growth momentum for road logistics sector; outlook remains stable: ICRA

The domestic road logistics sector is expected to continue its growth momentum in FY2023 supported by the accelerated pace of business activities, following a healthy growth in FY2022. Ratings agency, ICRA maintains its growth estimates of ~7-9% in FY2023 over FY2022. The ability of the organised players to command a price premium in light of the fuel price inflation scenario, while retaining cost reduction initiatives, will support operating profitability in FY2023. However, the margin movement will continue to depend on customer demand attitudes, diesel price fluctuations, and the industry's competitive intensity. As a result of the anticipated debt-financed capital expenditures for vehicle replacement required prior to the commencement of the scrappage policy and the rising interest rate environment, it is anticipated that debt coverage metrics will marginally weaken in FY2023 relative to FY2022 levels.

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