The revenues of the Indian road logistics industry will remain range-bound and grow at sedate pace of 3-6 per cent in Fiscal 2025 (FY2025), given the limited ability of players to increase the freight rates, expected softening in government capex during the elections (given the Model Code of Conduct requirements) and moderation in consumer demand sentiments amid high inflation and interest rates, as per the credit rating agency ICRA.

The outlook for the sector continues to be Stable, fuelled by a sustained momentum in economic activities, enhanced traction of organised trade and continued support from varied segments like e-commerce, FMCG, retail, pharmaceuticals, and industrial goods, ICRA said in a press release.

Suprio Banerjee, vice president and sector head – Corporate Ratings at ICRA Limited, shed light on the financial performance and outlook for the logistics sector. Banerjee revealed that ICRA's analysis showed a modest revenue increase of 2.3 per cent in the first nine months of the fiscal 2024, compared to the same period last year. This growth comes amidst challenges such as high inflation, an erratic monsoon season, elevated interest rates, and a subdued festive period.

He further projected, "On an elevated base of FY2023, ICRA estimates a low single-digit growth of 2-5 per cent in FY2024." Looking ahead to the fiscal 2025, Banerjee anticipates growth for the road logistics sector to be in the range of 3-6 per cent, influenced by ongoing economic factors like inflation and interest rates, as well as slowly recovering consumer sentiment.

The industry's operating profit margin also saw a decline, falling to 11.2 per cent in the first nine months of FY2024, a drop of approximately 150 basis points from the previous year. This contraction is attributed to increased operating costs, excluding fuel, and the challenges of raising prices due to stable retail diesel rates.

Looking forward, Banerjee expects, "The margins to remain in the range of 10.5-12.5 per cent in FY2024 and FY2025," despite the headwinds of inflation. This projection is also supported by potential efficiency gains from digitalisation and new services offered by industry players. Regarding debt metrics, he notes a slight increase in the Total debt/OPBITDA ratio, attributing it to higher operating costs and investment in new vehicles and technology.

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