The report highlights a growing demand outlook, particularly driven by various sectors, including e-commerce, fast-moving consumer goods (FMCG), retail, chemicals, pharmaceuticals, and industrial goods. This surge in demand is anticipated to result in a projected revenue growth of 6-9% for the industry in FY2024, building upon a solid base established in FY2023. ICRA emphasized its belief in the sector’s stability in the foreseeable future.

Nonetheless, ICRA acknowledges the existence of potential negative risks that could impact these projections. These risks include a substantial reduction in demand due to factors like high inflation, rising interest rates, and the dynamics of global supply and demand that influence the Indian economic environment. Furthermore, ICRA anticipates a slight improvement in the industry’s debt coverage metrics in FY2024 compared to the previous fiscal year, while operating margins are expected to contract due to inflationary pressures on input costs, including elevated crude oil prices and capital expenditures financed through debt for vehicle replacements.

ICRA pointed out that despite a decrease in crude oil prices in the first quarter of FY2024, the logistics operators experienced a margin squeeze due to delays in implementing price increases.