Logistics sector to grow at 8-10 pc over the medium term; outlook stable: ICRA
ICRA Research said the ensuing demand momentum will lead to higher freight volumes in the second half of FY20 despite the weak macro-economic scenario.
The domestic logistics sector is set to grow at 8-10 percent over the medium term with the outlook remaining largely stable, ratings agency ICRA said on Wednesday.
The key drivers for demand pickup would be the festive season as well as the anticipated revival in infrastructure spending post monsoon and improvement in receivable cycle of contractors, it said in a statement.
"ICRA Research has forecast the domestic logistics sector to grow at 8-10 percent over the medium term with the outlook remaining largely stable," it said.
The ensuing demand momentum will lead to higher freight volumes in the second half of FY 2020 despite the weak macro-economic scenario, it added.
ICRA Ratings Vice President Shamsher Dewan said: "We expect the sector to continue to outpace the GDP growth over the medium term, which apart from demand side factors would also be supported by supply-side positives like emergence of integrated logistics players, investments in infrastructure development such as warehouses and inter-modal transport hubs, and capacity augmentation being undertaken by large logistics players."
"Industry capex towards capacity augmentation (fleet, warehousing, cold storage, terminals etc) and investments in technology to improve service offerings is estimated at Rs 9-11 billion annually (which translates into 2-3 percent of operating income)," the statement added.
The credit metrics of ICRA's sample of logistics companies are anticipated to remain comfortable, it said.
On the flip side, however, ICRA's analysis of sample of 12 large logistics players in Q1 FY20 has indicated a slowdown to 7 percent as compared to 11 percent in Q4 FY19 and 10 percent in Q1 FY19.
Dewan added: "ICRA expects the Indian logistics industry to continue evolving/being shaped in the medium term as reflected by ongoing trends. This includes trends like shift towards organised players post GST and e-way bill implementation, focus on multi-modal offerings, increasing interest by private equity and foreign players in the space, emergence of ecommerce logistics requirements, focus on warehousing and cold chain services, and increased adoption of technology."
(Edited by Teja Lele Desai)
How has the coronavirus outbreak disrupted your life? And how are you dealing with it? Write to us or send us a video with subject line 'Coronavirus Disruption' to firstname.lastname@example.org