ICRA Projects 6-9% Revenue Growth for Road Logistics in FY2025
ICRA expects the Indian road logistics sector to grow by 6-9% year-on-year in FY2025. After a brief slowdown in Q1 due to General Elections, the industry anticipates a boost from the festive season, increased manufacturing output, consumer spending, and e-commerce activities. A favorable monsoon and the government's focus on capital formation will also support growth.
ICRA maintains a 'Stable' outlook for the sector, driven by supportive government policies and steady demand across e-commerce, FMCG, retail, chemicals, and industrial goods. Organised players are expected to retain pricing premiums, although profitability will remain below FY2023 levels. Debt coverage metrics are projected to stay strong, with interest coverage between 7.0x-8.0x and total debt/OPBITDA between 1.4x-1.7x for FY2025.
Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA Limited, 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 lacklustre 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”.
The e-way monthly volumes have grown steadily over the years and remained largely stable in the last four months at above 100 million, with August 2024 reporting all-time high volumes of 105 million, signifying 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 in the current fiscal, 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,” Mr. Krishnamurthy added.
