Indian fleet operators’ revenue to rise 8-10 pc on robust domestic demand

New Delhi, Oct 27
Domestic commercial fleet operators are projected to clock 8-10 per cent revenue growth this fiscal, building on a robust compound annual growth rate (CAGR) of 12-13 per cent over the four years through fiscal 2025, a Crisil report showed on Monday.

Strong domestic and import related fleet requirement will drive growth even as export-related demand growth remains modest, the report said.

“The government’s infrastructure push will enable faster turnarounds and improved efficiencies for fleet operators, cranking up their volume throughput,” said Himank Sharma, Director, Crisil Ratings.

Hence, growing demand from consumption and freight-intensive sectors, and better roads should offset the impact of higher US tariffs on export volume.

“Thus, fleet operators will see revenues grow, riding on buoyant domestic consumption,” he added.

Higher demand will increase fleet utilisation to 86-87 per cent this fiscal from 85 per cent last fiscal despite fleet additions.

As a result, operating margins will remain stable, even as operational costs are set to increase due to the regulatory requirement of adding air conditioning (AC) to cabins of new fleet from October 2025.

Further, the cost of acquisition of new fleet will reduce due to the recent reduction of Goods and Services Tax (GST) on commercial vehicles to 18 per cent from to 28 per cent.

Thus, credit profiles are expected to remain stable despite debt addition for fleet, the report mentioned.

Domestic demand contributes 65-70 per cent of the revenues of fleet operators, while the remaining comes from export-import traffic.

As per the report, increased fleet utilisation will ensure operating margins remain stable at 8.0-8.5 per cent.

Additionally, higher revenues and stable margins will result in improving cash flows, partially funding the incremental working capital requirement.

Dependence on external short-term debt will be limited, while the operators will undertake sizeable fleet additions funded by long-term debt, riding on continued strong demand, said the report.

“Supported by lower total cost of ownership following the GST revamp and lower interest rates, fleet operators are expected to undertake a sizeable capex of Rs 1,200-1,300 crore this fiscal, funded by 80-90 per cent debt. This will be 15 per cent higher than the average capex over the last three fiscals,” said Shalaka Singh, Associate Director, Crisil Ratings.