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Credit rating agency CRISIL in its latest report has said that domestic shipping companies are likely to see a further 5-7 per cent decline in revenue in the next financial year (FY25) amid normalisation of the rates. This follows a steep 23-25 per cent fall in their revenue in the current fiscal (FY23) after a 35 per cent growth in the last financial year when charter rates had surged because of geopolitical conflicts (including the Russia-Ukraine war) and higher demand from China post-pandemic. 

While the margin profile may vary widely across players operating in different segments, the report said the average operating margin may continue to moderate to 33-35 per cent in the next fiscal driven mainly by the correction in charter rates. However, it will remain higher than the pre-pandemic levels of 25-30 per cent. It said this along with modest capital expenditure (capex) plans, should sustain the healthy credit risk profiles of shipping companies. It stated that the shipping fleet of domestic companies is dominated by tankers that carry crude oil and petroleum products (contributing to around 70 per cent of total DWT), followed by dry bulk carriers carrying unpackaged commodities such as coal, iron ore and grains (around 20 per cent). It added that the balance is distributed between container ships, gas carriers and others. It said the charter rates correlate with the global demand-supply dynamics. 

According to the report, charter rates for crude oil and petroleum product tankers will be supported by growing imports by China and India; also, to be aided by better fleet utilisation given higher tonne-mile demand due to change in trade routes following the Russia-Ukraine conflict. On the supply side, it said capacity addition for tankers is expected to remain limited given the decadal-low orderbook, which will keep charter rates much higher than the pre-pandemic level of $15,000-25,000/day.