Domestic road logistics sector expected to grow 6-9%: ICRA

The Indian Road logistics industry is expected to grow by a moderate 6-9% YoY in FY2025, as per latest ICRA report.

An increase in manufacturing output amidst restocking and an uptick in consumer spending and e-commerce activities augur well for logistics demand and prepare the sector for the much-awaited seasonally strong festive period, the rating agency said. This, coupled with a favourable monsoon and the government’s continued thrust on capital formation, is likely to support revenue growth, it noted. 

ICRA maintains a ‘Stable’ outlook for the sector, fuelled by various government measures and policies in favour of the sector and the expectation of a stable demand outlook from varied segments like e-commerce, FMCG, retail, chemicals, pharmaceuticals, and industrial goods.

The report further said that 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 rating agency foresees organised players to maintain the pricing premium amid an overall inflationary cost scenario and shall support operating profitability in FY2025. Nevertheless, it would remain range-bound and trail the peak levels seen in FY2023, the report added. The debt coverage metrics are expected to remain comfortable in FY2025, despite some anticipated increase in debt levels due to capex for new vehicles, coupled with the rise in lease liabilities due to expanding branch network and technology investments. ICRA projects the interest coverage and total debt/OPBITDA in the range of 7x-8x and 1.4x-1.7x, respectively, in FY2025 compared to 7.6x and 1.6x in FY2024.

According to ICRA, 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, the report mentioned.