Logistics growth to be driven by e-commerce among other sectors: ICRA

The near-term growth of the -battered sector is expected to be driven by specific segments like e-commerce, ratings agency said on Monday.

Logistics growth to be driven by e-commerce among other sectors: ICRA

Citing how trends in online purchases and deliveries have picked up substantially post the lockdown, it also pointed out the pickup in the automotive sector, especially entry-level cars, motorcycles, and the tractors segment which augurs well for specific logistics players like auto carriers.

However, other segments like capital goods continued to remain subdued for the logistics sector.

In its analysis of ten leading logistics companies, ICRA observed an adverse impact in Q1FY21 as aggregate revenues of players declined by 35 percent on a YoY basis, in line with the sharp moderation in GDP growth.

“While the revenues and profitability in Q2 FY2021 would have revived from the troughs witnessed in Q1 FY2021, given ongoing intermittent lockdowns in various parts of the country and continued rapid spread of the pandemic constraining the pace of recovery in industrial activity, the logistic sector is also likely to witness a gradual roadmap to recovery,” ICRA said in a statement.

For FY21, ICRA expects the revenue of its sample to decline by 18-20 percent YoY, against the backdrop of 11 percent contraction in GDP.

Shamsher Dewan, Vice President, ICRA Ratings, said: “While the situation has eased to some extent in Q2 FY2021, the pressure on cash flows of fleet operators is expected to continue, given under-utilisation of assets, rising diesel costs and continued fixed costs like driver salaries.”

“Furthermore, while RBI’s forbearance initiative provided some relief in the initial days of the lockdown, expiry of the moratorium period and consequent re-commencement of EMI payments from September 2020 would also exert pressure on their cash flows going forward, despite some earnings improvement expected as the year progresses.”

Over the medium term, the sector is likely to witness some consolidation trends, given the rising pressure on viability of small fleet operators, ICRA said.