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            november 20, 2019

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CIBE 2019

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Indian logistics sector to grow 8-10pc over medium term


ICRA Research has forecast a stable outlook for the Indian domestic logistics sector, which it said would grow between eight and ten per cent over the medium term.
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, it said in a statement.
"ICRA Research has forecast the domestic logistics sector to grow at 8-10 per cent over the medium term with the outlook remaining largely stable," it said. The ensuing demand momentum will lead to higher freight volumes in the second half of FY2020 despite weak macroeconomic 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 - warehouses & 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 INR 9-11 billion (US$126.8 million - US$155 million) annually (which translates into 2-3 per cent of operating income)," the statement added.
Subdued freight availability due to economic slowdown and flat freight rates led to moderate revenue growth momentum of the logistics sector. Certain industry demand segments like automobile, FMCG and retail displayed the slow growth that primarily impacted the unorganised players over-dependent to these sectors. The organised and integrated players with diversified presence continued to grow their market-share in the post GST and E-way bill era, albeit at a slower pace, reports Mumbai's Indian Transport & Logistics News.
"Going forward, ICRA expects the Indian logistics industry to continue evolving/being shaped in the medium term as reflected by the on-going 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 e-commerce logistics requirements, focus on warehousing and cold chain services, and increased adoption of technology," concluded Mr Dewan.

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