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Domestic road logistics sector to grow 6-9% in FY22: Icra

The logistics sector reported a strong recovery over H2 FY2021, a sharp contrast to the steep decline in revenues and earnings reported over Q1 FY2021.Premium
The logistics sector reported a strong recovery over H2 FY2021, a sharp contrast to the steep decline in revenues and earnings reported over Q1 FY2021.

  • With the demand recovery sustaining post the festive season as well over Q4, the logistics sector pared some of the losses of the first half and closed the fiscal with a revenue growth of 4% for FY2021 against 4% contraction expected earlier by Icra

New Delhi: In an encouraging signal for the Indian economy, domestic road logistics sector witnessed a strong rebound, and is likely to grow by 6-9% in the current financial year, according to Icra Ratings.

This comes in the backdrop of India posting record goods exports of $95 billion in the first quarter of the current financial year.

“The sector continued a strong rebound as facilitated by recovery across industries and improving freight availability. With the demand recovery sustaining post the festive season as well over Q4 FY2021, the logistics sector pared back some of the losses of the first half and closed the fiscal with a revenue growth of 4% for FY2021 against 4% contraction expected earlier by ICRA," Srikumar Krishnamurthy, vice president and co-head, Icr Ratings said in the statement.

The Indian economy contracted by 7.3% in FY21 due to the first wave of the covid-19 pandemic. With many states easing lockdowns imposed during the second wave of the pandemic, India’s growth projections have been subdued and below 10% for the current financial year.

“Despite returning to pre-Covid levels, freight rates continued to remain firm given the rise in fuel costs. Sustained growth in E-way bill and freight volumes remained a testimony to the firming up of the sector’s performance over Q4 FY2021," Krishnamurthy added.

Indian exports were $32.5 billion in June, with shipments during the quarter surging 85% from a year earlier and 18% from the same period in FY20.

“The logistics sector reported a strong recovery over H2 FY2021, a sharp contrast to the steep decline in revenues and earnings reported over Q1 FY2021. The logistic sector reported a growth of 9% sequentially in Q4 FY2021 backed by sustained recoveries across the sectors. Some of the industry players also reported historically highest quarterly revenues during Q4 FY2021," the ICRA statement said.

The indicators have been suggesting a recovery with national highways toll collections in June also increasing by 21% to 2,576.28 crore as compared to 2,125.16 crore recorded in May. India’s highways have started getting busy again reflecting a rebound in economic activity before the second wave hit the country.

"Piecemeal relaxations in lockdown related restrictions and adjustment to the new normal, revived economic activity and improved freight availability helped the players," the statement added.

Analysts believe India’s toll road projects may still register low revenue growth in the current financial year, despite the interstate and intrastate restrictions put in place to contain the second wave of coronavirus pandemic.

“Most logistics players reported sustained growth in freight volumes on a Y-o-Y basis over Q3 FY2021 and Q4 FY2021. The rail freight traffic reported similar trends, reporting Y-o-Y growth of 13% and 11% in Q4 FY2021 and Q3 FY2021 respectively. The railways even reported its highest ever monthly freight volumes in March 2021, surpassing previous highs of January 2021," the statement said.

“The seaways freight traffic, though growing slower than the other modes on account of supply-side/infrastructure constraints, has nevertheless, also reverted to its growth trajectory from November 2020 onwards with the highest ever monthly freight volumes reported in March 2021," the statement added.

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