India’s road logistics industry will grow at sedate pace of 3%-6% in FY2025, given the limited ability of players to increase the freight rates. According to ICRA, the “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,” is the reason why the logistics growth will be modest.
However, 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.
Suprio Banerjee, VP & sector head – corporate ratings, ICRA, said, “We witnessed a modest revenue growth of 2.3% in the nine months of FY2024 on a YoY basis amidst tapering demand due to high inflation, an uneven monsoon, a high interest rate regime and relatively muted festive season. Thus, on an elevated base of FY2023, ICRA estimates a low single digit growth of 2%-5% in FY2024 .” The growth for road logistics sector in FY2025 is expected to be in the range of 3%-6%, he said. The industry’s operating profit margin contracted to 11.2% in the nine months of FY2024 (down around 150 bps YoY), on account of increase in operating costs (ex-fuel) due to the high inflationary regime, and pressure on realisations, given the sticky retail diesel rates. “ICRA expects the margins to remain in the range of 10.5%-12.5% in FY2024 and FY25 over 12.4% in FY23 amidst inflationary headwinds and despite benefits of efficiency gains due to increasing digitalisation and value-added service offerings of industry players,” said a company statement.
E-way monthly volumes remained largely stable in the last four months at above 85 million, post reporting all-time high volumes of 100 million in October 2023. . The monthly FASTag volumes have also moved in tandem with the e-way bills, ranging from 295 million to 350 million in the current fiscal, with an all-time peak of 348 million in December 2023, reflecting business continuity said the statement.
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