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Ratings agency ICRA in its latest report has said that the domestic road logistics sector is expected to continue its growth momentum in FY2023 supported by the accelerated pace of business activities, following a healthy growth in FY2022. ICRA maintains its growth estimates of 7-9 per cent in FY23 over FY22. It noted that the ability of the organised players to command a price premium in light of the fuel price inflation scenario, while retaining cost reduction initiatives will support operating profitability in FY2023.

However, the report stated that the margin movement will continue to depend on customer demand attitudes, diesel price fluctuations, and the industry's competitive intensity. As a result of the anticipated debt-financed capital expenditures for vehicle replacement required prior to the commencement of the scrappage policy and the rising interest rate environment, it is anticipated that debt coverage metrics will marginally weaken in FY2023 relative to FY2022 levels. It pointed out that the introduction of the National Logistics Policy (NLP) aimed at promoting the seamless movement of goods, overcome transport-related challenges, encouraging digitization along with the significant reduction in time and cost, is targeted to reduce the logistics costs from 13-14 per cent of GDP to single digits.

According to the report, this augurs well for the road logistics sector, as it shall reduce the overdependence on road through better integration of different modes of transport and in turn improve demand identification, thereby enabling better availability of trucks. However, it said the implementation remains the key, given the coordination of multiple agencies, stakeholders, and physical entities involved. The logistics sector's quarterly revenues increased by 5.8 per cent in Q1 FY2023 compared to Q4 FY2022, thanks to solid and sustained demand from the manufacturing sector. The revenue remains close to multi-year high quarterly revenues, supported by a sustained recovery in industrial activities.