FCC

Road logistics set to grow up to 9% FY23

2022-10-12

Following healthy growth in FY22, the domestic road logistics industry is expected to maintain its momentum in FY23, aided by the quickened pace of business activities. ICRA, a rating firm, maintains its FY23 growth forecast of 7%-9% above FY22. The ability of organised players to command a price premium due to fuel price rise, along with price reduction activities, will boost working profitability in FY23.

However, margin movement will continue to be determined by customer demand attitudes, diesel price changes, and the business's aggressive depth. Because of the anticipated debt-financed capital expenditures for automobile replacement required prior to the graduation of the scrappage coverage and the growing rate of interest environment, debt protection measures are anticipated to be marginally weaker in FY23 in comparison to FY22 ranges.

The logistics sector's quarterly revenues climbed by 5.8% in Q1 FY23 vs Q4 FY22, owing to strong and consistent demand from the manufacturing sector. The revenue continues close to multi-year high quarterly sales, owing to the continued rebound in industrial activity. This is also shown in the consistency of monthly e-way bill volumes and FASTag volumes during Q1 FY23, which is expected to continue in the current quarter for July-August 2022. Following a 16.5% increase in FY22 (over pre-Covid levels) and a 5.8% increase in Q1 FY23, driven by a rebound in economic activity and strong freight rates, ICRA forecasts a 7%-9% YoY increase in the logistics industry.

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