Despite challenges such as limited ability to raise freight rates, India’s road logistics industry anticipates a subdued growth of 3-6 percent in the fiscal year 2025, according to ICRA.
India’s road logistics industry is projected to witness a gradual expansion of 3-6 percent in the fiscal year 2025, attributed to constraints in increasing freight rates. ICRA highlights factors contributing to this subdued growth, including anticipated softening in government capex during elections and moderated consumer demand sentiments amidst elevated inflation and interest rates. Despite these challenges, the sector’s outlook remains stable, buoyed by sustained economic activities, growing organised trade, and continued support from sectors like e-commerce, FMCG, retail, pharmaceuticals, and industrial goods.
Suprio Banerjee, VP & sector head of corporate ratings at ICRA Limited, noted a modest revenue growth of 2.3 percent in the nine months of FY2024, amidst various economic challenges. Operating profit margins contracted to 11.2 percent in FY2024 due to increased operating costs and pressure on realisations amid sticky retail diesel rates. Despite inflationary pressures, ICRA anticipates margins to remain in the range of 10.5-12.5 percent in FY2024 and FY2025.
The industry faces environmental and social risks, including the need for investments in alternative fuel vehicles to meet tightening emission control norms and challenges related to driver shortage and work-life balance. Despite these challenges, resilient domestic trade and transportation activities are evident, with stable monthly e-way and FASTag volumes reflecting ongoing business continuity.
