As per the ratings agency ICRA, the domestic logistics sector is set to grow at 8-10 per cent with the outlook remaining stable. They said in a statement that the key drivers for demand pick-up would be the festive season as well as the anticipated revival in infrastructure spending post monsoon and improvement in receivable cycle of contractors.
The ensuing demand momentum will lead to higher freight volumes in the second half of FY 2020 despite the weak macro-economic scenario, it added.
ICRA Ratings Vice President Shamsher Dewan said: "We expect the sector to continue to outpace the GDP growth over the medium term, which apart from demand side factors would also be supported by supply-side positives like emergence of integrated logistics players, investments in infrastructure development such as warehouses and inter-modal transport hubs, and capacity augmentation being undertaken by large logistics players."
"Industry capex towards capacity augmentation (fleet, warehousing, cold storage, terminals etc) and investments in technology to improve service offerings is estimated at Rs. 9-11 billion annually (which translates into 2-3 per cent of operating income)," the statement further added.
The credit metrics of ICRA's sample of logistics companies are anticipated to remain comfortable, it said. On the flip side, however, ICRA's analysis of sample of 12 large logistics players in Q1 FY20 has indicated a slowdown to 7 percent as compared to 11 percent in Q4 FY19 and 10 percent in Q1 FY19. Dewan added: "ICRA expects the Indian logistics industry to continue evolving/being shaped in the medium term as reflected by ongoing trends. This includes trends like shift towards organised players post GST and e-way bill implementation, focus on multi-modal offerings, increasing interest by private equity and foreign players in the space, emergence of ecommerce logistics requirements, focus on warehousing and cold chain services, and increased adoption of technology."