7 Apr 2022 , 02:48 PM
Mr. Suprio Banerjee, Vice President & Sector-Head, ICRA Ratings, said, “Quarterly revenues for the logistics sector breached multi-year highs during Q2 FY2022 and Q3 FY2022 supported by sustained recovery in industrial activities. The impact of third wave was minimal as the hospitalisation rates were low. While there were regional restrictions for a brief period, manufacturing, construction activities and movement of goods were permitted due to which the impact on commercial traffic was limited. This is also reflected by the stability in monthly e-way bill volumes as well as FASTag volumes since during Jan-Feb 2022. ICRA expects the logistics sector to have grown by 14-17% in FY2022 (over pre-Covid levels) and the growth momentum is likely to continue in FY2023 with estimated growth of 7-9% Y-o-Y. While concerns around threat of potential new Covid variants remains, the demand impact is likely to be limited. Margins, however, shall remain sensitive to risks stemming from a continued rise in commodity and fuel prices owing to the fallout of the Russia-Ukraine conflict. Multiple rate hikes of diesel are being witnessed in the last two weeks and the same is likely to continue over the next few days.”
Overall, the aggregate revenues of ICRA’s sample of nine leading logistics companies increased on a Q-o-Q basis in Q3 FY2022 by 6.8% over Q2 FY2022. On a Y-o-Y basis, volumes for FASTag grew by 54% and e-way bill volumes grew by 7% in Jan- Feb 2022, given the easing of restrictions and rapid abatement of the third wave. However, industry volumes remain sensitive to economic activity on an aggregate. Margins recovered sharply with steep Q-o-Q industry revenue growth in Q2 FY2022. Improving scale of operations had a positive impact on operating margins, which remained healthy at 14.5% in Q3 FY2022; although the spike in fuel prices in Q3 FY2022 moderated margins relative to Q2 FY2022. ICRA expects the aggregate operating profit margins of the sample in the range of 12-14% in FY2022 against 12.1% in FY2021. Nevertheless, with the expected adverse impact of spike in commodity prices amidst the ongoing geopolitical tensions, the players’ ability to pass-on are to be seen in the coming quarters.
Revenue growth over the medium term would continue to be driven by demand from varied segments like e-commerce, FMCG, retail, chemicals, pharmaceuticals and industrial goods coupled with the industry’s paradigm shift towards organised logistics players post GST and E-way bill implementation. Furthermore, multimodal offerings are likely to gain increased acceptance and traction going forward, given that players offering multimodal services had more flexibility. Given these factors, and the relatively higher financial flexibility available to large organised players vis-Ã -vis their smaller counterparts, there is potential for increased formalisation in the sector going forward.
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