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For road transport operators, revenue growth expected to double to 9-11% this year

India’s road transport fleet operators are set to witness a substantial boost in revenue growth, with projections suggesting it could double to 9-11 percent in the current financial year 2024-25, according to a report by Crisil Ratings.

The rating agency’s estimates are underpinned by improved domestic demand, despite tepid exports. Additionally, operating margins are anticipated to improve due to better fleet utilization and steady fuel costs.

Crisil’s analysis indicates that the credit profile of operators is likely to remain strong, as they may moderate capital expenditure on expansion following robust additions over the past three years. This projection comes ahead of new guidelines mandating air-conditioned driver cabins, set to take effect next year.

“With the focus now on consolidation of operations, fleet additions would moderate to 15 percent of the existing fleet size this fiscal, on a significantly expanded base,” stated the Crisil report. “To boot, the Ministry of Road Transport and Highways mandate of air-conditioned cabins for drivers from October 2025 would lead to nominal capex if operators decide to retrofit older vehicles.”

The report further noted that nearly a third of freight demand emanates from export-oriented sectors, which, after decelerating last year, are showing signs of improvement, aligning with growth trends in India’s key export destinations—the Eurozone and the United States.

Crisil anticipates that growth in volume this year will be driven by freight-intensive domestic sectors, such as mining, industrial, manufacturing, infrastructure, and engineering goods.

With some costs remaining steady, the operating margins of road transport operators are expected to improve to 9.0-9.5 percent this year, the report added.

(Inputs from ANI)

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Last Updated: 14th Jun 2024