Outlook for Road Logistics Sector Remains Stable: ICRA

Favourable demand sentiments continue to drive growth momentum for the road logistics sector. Following a healthy growth in FY2022, the accelerated pace of business activities is expected to continue to support the Indian road logistics sector’s growth momentum for FY2023. ICRA has revised its growth estimates for the sector to ~11-13% for FY2023 against the previous estimate of 7-9%. The growth is supported by a strong demand environment, coupled with continuation of firm freight rates, also supported by the base effect to an extent, given that FY2022 had a weak first quarter due to the second wave of Covid-19.

ICRA expects revenue growth at a higher single digit for FY2024 over FY2023 on an elevated base and continuation of a healthy demand scenario. Downside risks to the estimates, however, remain sensitive to the emergence of any further waves or new variants, as witnessed in a few countries, and its ripple effects on India, given its strong linkage to economic activity on an aggregate basis. The debt coverage metrics are expected to marginally moderate in FY2023 and FY2024 compared to the FY2022 levels, owing to expected debt-funded capital expenditure for vehicle replacement required prior to the introduction of the scrappage policy, along with the rising interest rate regime.

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