Near-term growth of logistics sector to be driven by e-commerce: ICRA

The rating agency ICRA has said that the near-term growth of the COVID-19-battered logistics sector is expected to be driven by specific segments like e-commerce. Mentioning how trends in online purchases and deliveries have picked up considerably post the lockdown, it also pointed out the surprise in the automotive sector, especially entry-level cars, motorcycles, and the tractors segment, which augurs well for particular logistics players like auto carriers. However, other segments like capital goods continued to remain restrained for the logistics sector.

In its study of ten leading logistics companies, ICRA observed an adverse impact in Q1FY21 as aggregate revenues of players dropped by 35 per cent on a YoY basis, in line with the sharp moderation in GDP growth. The agency said while the revenue & profitability in Q2FY21 would have rejuvenated from the troughs observed in Q1FY21, given the ongoing intermittent lockdowns in various parts of the country as well as the continued rapid spread of the pandemic constraining the pace of recovery in industrial activity, the logistic sector is also likely to witness a gradual roadmap to recovery.

For FY21, it expects the revenue of its sample to decline by 18-20 per cent YoY, against the backdrop of 11 per cent contraction in GDP. Besides, it concluded that over the medium term, the sector is likely to witness some consolidation trends, given the rising pressure on the viability of small fleet operators.