Fleet operators on the fast lane

Fleet operators are likely to continue to replenish their fleets with this fiscal value due to higher demand from the intensive road transport sectors and despite the greater repayment burden that arises due to higher interest rates on loans. This is expected to increase their revenues by 10-12 percent this fiscal year, according to a report released Wednesday by CRISIL Ratings.

Although fleet replenishment will lead to increased debt and leverage, credit profiles will remain stable, an analysis of 45 major fleet operators rated CRISIL Ratings, representing one-fifth of the industry in size, indicates this.

Extensive economic recovery after the disappearance of the pandemic and demand in sectors such as steel, cement and coal, led to 88 percent of fleet utilization last fiscal year from 75 percent in the 2021 fiscal year. failures due to the pandemic will improve utilization by up to 95 percent, the report said.

Steady demand from the intensive freight sectors and higher fleet congestion have resulted in higher freight rates by 3-4 percent compared to last year, while the contraction of world crude oil has led to a revision of domestic retail fuel prices. However, the belated broadcast of changes in fuel prices in freight rates will provide a stable operating profit for fleet operators, he continues.

Rahul Guha, director of CRISIL Ratings, said: “Freight rates are passed on to shippers lagging behind because fleet operators are trying to find a balance between raising rates and using the fleet. With fleet utilization increasing by 7-8 percent, and freight rates reflect retail fuel prices, fleet operators ’revenues will grow by 10-12 percent this fiscal year, while operating profitability will remain stable at 7.5-8.0 percent “.

According to the report, the accrual of cash is expected to lead to revenue growth and a stable operating margin. This would provide the means to increase power. With high demand for freight, fleet utilization will increase rapidly due to increased capacity.

While interest rates have risen after the Reserve Bank of India raised the repo rate, the main demand will be to ensure that fleet operators will go to replenish the fleet.

Himank Sharma, director of CRISIL Ratings, “The reduced fleet expansion over the last two fiscal years has helped operators save money. The costs of expanding the fleet will now mitigate their debt performance, but credit profiles will remain stable because the interest rate and debt service ratio is expected to be more than 3.5 times and 1.6 times respectively. This is 4.6 and 1.9 times compared to the previous fiscal, respectively. “

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