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India Ratings and Research (Ind-Ra) recently assigned a stable outlook to India’s logistics sector for fiscal 2021-22 based on its expectation of strong gross domestic product growth in the next fiscal, the strong-to-moderate recovery being witnessed across various logistics sub-sectors and commissioning of the dedicated freight corridor that could boost volumes and efficiencies across ports as well as inland container depots.
Major ports’ year-on-year (YoY) volume growth has been positive for the past three months, while private ports led by Adani Ports and the Special Economic Zone also reported resilient volumes in the first nine months of this fiscal.
In the next fiscal, Ind-Ra estimates an 8 per cent YoY improvement in volumes for India’s ports sector, post an estimated 4 per cent YoY decline in this fiscal. The 8 per cent YoY rise will be led by private ports, which in the past five years have displayed a median multiplier (vs real GDP growth rate) of 1.4 times, thus outperforming growth from major ports, Ind-Ra said in a press release.
Historically, India’s ports volumes have closely followed GDP growth, with container growth coming in twice of overall cargo volumes.
Domestic air travel demand, which has continued to recover in the second half of this fiscal, is expected to strengthen in the next fiscal, though the risk to this view arises from fresh waves of COVID-19 recently.
Both corporate and domestic travel demand are already showing signs of revival, which has helped support load factors and yields, while cargo volumes are expected to rise amid stronger macro-economic fundamentals and e-commerce push.
Ind-Ra forecasts domestic passenger numbers to rise by 10 per cent in the next fiscal (over fiscal 2019-20) implying a GDP multiplier of 0.9 times, lower than the 2.4 times (median estimate) for the FY15-FY20 period.
Ind-Ra believes air travel demand will be supported by a moderate recovery in corporate travel and a pent-up travel demand. Lastly, as mass-scale vaccination progresses, VFR (visiting friends and relatives) demand too should start normalising to pre-COVID levels.
The rating agency believes fuel price trend,trajectory of yield recovery, airlines’ ability to deal with cost inflation and competition remain the key rating issues worth monitoring in the next fiscal.
For inland container depot/container freight station operators, Ind-Ra forecasts a healthy pickup in volumes though competition remains intense and realisations remain soft. The reduced dwell time after the commissioning of dedicated freight corridor and increased double stacking volume will support higher operating efficiencies.
Fibre2Fashion News Desk (DS)
Ind-Ra has assigned a stable outlook to India's logistics sector for FY22 based on its expectation of strong GDP growth in the next fiscal, the strong-to-moderate recovery being witnessed across logistics sub-sectors and commissioning of the dedicated freight corridor that could boost volumes and efficiencies across ports and inland container depots.