ICRA downgrades Indian logistics sector

Credit rating firm ICRA has revised the outlook on the Logistics sector from ‘Stable’ to ‘Negative.’ In its report released last week, the agency has cited restrictive measures initiated to combat Covid-19 early this year adversely impacting domestic logistics sector especially its road transportation vertical.

Shamsher Dewan, Vice President, ICRA Ratings, commented, “The implementation of nationwide lockdown to contain the Covid-19 spread resulted in disruption in supply-chains across sectors, restrictions on cross-border movement and dearth of availability of drivers and thereby led to contraction in revenue of the logistics sector in Q4 FY2020; and subsequently in Q1 FY2021.  Further, the near-term growth prospects of the sector also remain subdued owing to the evolving Covid-19 situation, which has exacerbated the Indian macroeconomic growth scenario. Accordingly, the domestic logistics sector is expected to contract sharply in the current fiscal.”

ICRA in its note has mentioned freight movement dropping significantly during the lockdown period as reflected in contraction of E-way bill by a staggering 52.7% Y-o-Y in Q1 FY2021 though it has shown some improvement in the following months. Covid-19 led  disruption also had a bearing on rail and seaways freight traffic with Rail and Seaways freight volumes contracting by 21.3% and 19.7% Y-o-Y, respectively, during Q1 FY2021.

”The decline in the freight volumes for the entire modal mix was more pronounced in the month of April 2020, owing to complete lockdown measures in place for the entire month. However, with gradual easing of lockdown limitations, E-way bill generation has revived to around 70%, while railways and seaways freight volumes have revived to 85-90% of pre-Covid levels in June 2020,” the agency note maintained.

(Representational image used)

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