 "Road transport fleet operators' revenue to grow by 9-11% in FY25: CRISIL")
Despite tepid exports, the revenues of road transport fleet operators is likely to grow by 9-11 per cent in 2024-25 (FY25) on the back of better domestic demand, according to ratings agency CRISIL Ratings (Crisil).
“The credit profile of operators should remain strong as well, as they may look to moderate capital expenditure (capex) towards fleet expansion, following strong additions in the past three fiscals, even as new guidelines for air-conditioned driver cabins kick in next fiscal. Providing support is also steady working capital,” the rating agency said on Thursday.
The agency expects operating morgins of fleet operators to increase by 75-100 basis points (bps) in the ongoing fiscal year.
Growth in road transport freight in FY25 will be driven by volume-intensive sectors like mining, industrial, manufacturing, infrastructure and engineering goods.
As a result, Crisil pegs fleet utilisation to improve to over 85 per cent this fiscal from 82-83 per cent last fiscal.
Crisil’s assessments are notwithstanding the potential impact on freight demand because of geopolitical uncertainties, changes in interest rates or sharp revision in domestic fuel prices.
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Fleet operators expanded their fleet size by 60 per cent for three straight fiscal years, as demand recovered sharply post the Covid-19 pandemic and returns from fleet additions were immediate.
Fleet additions are likely to be 15 per cent in FY25, and the cost impact of the ministry of road transport and highways’ 2023 decision to have air-conditioned cabins in all trucks would be nominal if operators choose to retrofit older vehicles with air conditioners.
Nearly a third of freight demand emanates from export-oriented sectors, which, after decelerating last fiscal, is showing signs of improvement, the agency said.
“Despite large fleet expansions over the past few fiscals, capital structures and debt protection metrics of operators have improved because of higher utilisation piggybacking healthy demand. With minimal debt addition this fiscal and stronger revenues and margins, credit metrics will continue to improve, ensuring healthy credit profiles for operators,” said Shalaka Singh, Associate Director at Crisil.