Fleet operators in expansion lane despite higher interest rates: Report
Jun 30, 2022
New Delhi [India], June 30 : Fleet operators are likely to continue adding to their fleet size this financial year, steered by higher demand from road-freight sectors despite higher repayment burden emanating from a rise in interest rates on loans, said a rating agency CRISIL report.
While interest rates have risen after the Reserve Bank of India hiked the repo rate by 90 basis points cumulatively, underlying demand will ensure fleet operators will go for fleet additions.
They are expected to grow 10-12 per cent in terms of revenue during financial year 2022-23.
"Continued demand from freight intensive sectors and higher fleet utilisation have reflected in 3-4% higher freight rates on-year, while swerving global crude oil has led to revisions in domestic retail fuel prices. However, lagged transmission of fuel price changes to freight rates will ensure stable operating margins for fleet operators," it said.
Broad-based recovery in the economy after the ebbing of the pandemic and demand from sectors such as steel, cement and coal, pushed fleet utilisation higher. In 2022-23, the economic recovery and minimal pandemic disruptions would improve utilisation to 95 per cent, the rating agency said.
"Curtailed fleet expansion during the past two fiscals had helped operators conserve cash. Spending on fleet expansion now will moderate their debt metrics, yet credit profiles will remain stable...," said Himank Sharma, Director at CRISIL Ratings.
Lastly, the rating agency that any impact on freight demand due to intensified Russia-Ukraine war, or a sharp revision in domestic fuel prices or a new wave of Covid-19 infections will, however, be some of the key monitorable.
