Logistics sector likely to record growth of 7-9% in FY23: ICRA
Credit ratings agency ICRA in its latest report has said that the logistics sector is projected to record a growth of 7-9 per cent in the current fiscal (FY23) but the industry players' margins are likely to remain ‘sensitive to risks’ stemming from a continued rise in oil and commodity prices amid the Russia-Ukraine conflict. It also estimated that the sector's growth stood at around 14-17 per cent in 2021-22 over pre-COVID levels, adding that the momentum is expected to continue in this fiscal as well.
According to the report, revenue growth over the medium-term would continue to be driven by demand from varied segments such as e-commerce, FMCG, retail, chemicals, pharmaceuticals and industrial goods coupled with the industry's paradigm shift towards organized logistics players post GST and E-way bill implementation. Furthermore, it said that multi-modal offerings are likely to gain increased acceptance and traction going forward, given that players offering multi-modal services had more flexibility.
Given these factors and the relatively higher financial flexibility available to large organised players vis-a-vis their smaller counterparts, the report noted that there is potential for increased formalisation in the sector going forward. It said in the last few months, there has been a sustained improvement in freight movements aided by recovery in demand across industries, increased pace of vaccination and rapid abatement of the third wave, which allowed for quick lifting of restrictions, among others. However, it said that elevated commodity prices and firming freight rates are key near-term headwinds.
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