For road transport operators, revenue growth expected to double to 9-11% this year
May 26, 2024
New Delhi [India], May 26 : Revenue growth for road transport fleet operators is expected to double to 9-11 per cent in the current financial year 2024-25, according to a report by Crisil Ratings.
The rating agency's estimates are based on better domestic demand despite tepid exports. The operating margin is seen improving on better fleet utilisation and steady fuel costs.
The credit profile of operators should remain strong as well, as they may look to moderate on capital expenditure spending towards expansion, following strong additions in the past three years, even as new guidelines for air-conditioned driver cabins kick in next year.
Reports suggest that auto manufacturers will soon have to install air conditioners inside driver cabins of trucks, and the rollout is expected to begin sometime in 2025.
"With focus now on consolidation of operations, fleet additions would moderate to 15 per cent of the existing fleet size this fiscal, on a significantly expanded base. To boot, the Ministry of Road Transport and Highways mandate of air-conditioned cabins for drivers from October 2025 would lead to nominal capex if operators decide to retrofit older vehicles," said the Crisil report.
Further, it noted that nearly a third of freight demand emanates from export-oriented sectors, which, after decelerating last year, is showing signs of improvement, in line with growth trends in India's key export destinations--the eurozone and the US.
Crisil expects growth in volume this year to be driven by freight-intensive domestic sectors, such as mining, industrial, manufacturing, infrastructure and engineering goods.
With some of the costs remaining steady, the operating margins of operators are expected to improve to 9.0-9.5 per cent this year, it said.
