Domestic road logistics sector could grow by 6-9% in FY22: ICRA

New Delhi (IANS) India’s domestic road logistics sector is likely to grow by 6-9 per cent in FY22, ratings agency ICRA said.

It said that the logistics sector reported a strong recovery over H2 FY2021, a sharp contrast to the steep decline in revenues and earnings reported over Q1 FY2021.

The logistics sector had reported a growth of 9 per cent sequentially in Q4 FY2021, backed by sustained recoveries across the sectors.

It had witnessed a sharp decline in revenues and earnings over Q1 FY2021 due to demand-supply disruptions amidst the imposition of the nationwide lockdown.

As per the agency, most logistics players reported sustained growth in freight volumes on a YoY basis over Q3 FY2021 and Q4 FY2021.

Besides, it cited that rail freight traffic reported similar trends, reporting YoY growth of 13 per cent and 11 per cent in Q4 FY2021 and Q3 FY2021, respectively.

Furthermore, the seaways freight traffic, though growing slower than the other modes on account of supply-side or infrastructure constraints, has nevertheless, also reverted to its growth trajectory from November 2020 onwards with the highest ever monthly freight volumes reported in March 2021, the agency said.

In terms of profitability, the agency pointed out that logistics companies have been able to arrest the margins contraction to a significant extent, despite higher fuel prices, supported by aggressive rationalisation of fixed overheads and cost-control initiatives.

“The sector continued a strong rebound as facilitated by recovery across industries and improving freight availability. With the demand recovery sustaining post the festive season as well over Q4 FY2021, the logistics sector pared back some of the losses of the first half and closed the fiscal with a revenue growth of 4 per cent for FY2021 against 4 per cent contraction expected earlier by ICRA,” ICRA Ratings Vice President & Co-head Srikumar Krishnamurthy said.

“Despite returning to pre-Covid levels, freight rates continued to remain firm given the rise in fuel costs. Sustained growth in E-way bill and freight volumes remained a testimony to the firming up of the sector’s performance over Q4 FY2021.”

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