The revenue of the Indian road logistics industry is projected to grow 6-9 percent year-on-year (YoY) in the current financial year (FY) from Rs 23,273 crore in FY24, according to a report by ratings agency ICRA, released on Thursday.
This estimated revenue growth is driven by increased consumer spending and e-commerce activities coupled with government capital expenditure. In the first quarter of FY25, the industry’s revenue rose 7 percent YoY to approximately Rs 5,900 crore.
“ICRA forecasts the industry’s operating profit margins to remain steady at 11-12 percent in FY25, with organised players expected to maintain pricing premiums, amid an overall inflationary cost scenario,” said Srikumar Krishnamurthy, senior vice president and co-group head – corporate ratings, ICRA Ltd.
According to the report, the electronic way (e-way) bills volumes in August this year, rose to a high of 105 million, consistently staying at above 100 million in the last four months.
E-way bills are digital documents required for moving goods worth over Rs 50,000 within India (interstate and intrastate). This signifies an increase in domestic trade and transportation activities.
The report noted that the industry witnessed a modest revenue growth of 4.6 percent YoY in FY24.
The growth was subdued on account of a relatively muted demand amid high inflation, an uneven monsoon, a relatively lackluster festive season and the rising interest rate regime.
The operating profit margin eased to 11.2 percent in FY24, down 120 basis points from FY23, due to rising operating costs (ex-fuel) amid the high inflation levels and stiff competition in the sector.
Road logistics players also remain exposed to environmental and social risks. Tightening emission control norms necessitate investments in either alternative fuel vehicles or in the current fleet.
They are also exposed to litigation/penalties arising from issues related to harmful emissions and waste, which may lead to financial implications and impact reputation. The social risk include driver shortage, health, safety, and quality of work-life balance for drivers.