Con­sol­i­da­tion & re­cov­ery drive growth: In­dia Ratings

Cargo Talk - - Domestic News -

In­dia Ratings and Re­search (Ind-Ra) ex­pects the in­fla­tion-ad­justed rev­enue of lo­gis­tics ser­vice providers to grow eight to nine per cent y-o-y in FY19 as against the es­ti­mated real Gross Do­mes­tic Prod­uct growth of 7.4 per cent. Ind-Ra ex­pects a re­cov­ery in global trade vol­umes in FY19, cou­pled with a higher de­mand for au­to­mo­bile, retail and FMCG, con­struc­tion ma­te­rial, coal and me­tals, to sup­port vol­ume growth across the lo­gis­tics space.

Ac­cord­ing to Ind-Ra, the lo­gis­tics space would un­dergo sub­stan­tial con­sol­i­da­tion over the medium to long term. In­te­gra­tion of goods and ser­vices mar­kets through GST may help cre­ate a hub-and-spoke model for lo­gis­tics play­ers. This is likely to be ac­com­pa­nied with a re­align­ment of sup­ply chains from the one based on tax in­cen­tives to those based on prox­im­ity to pock­ets of de­mand and sup­ply. The op­er­a­tional ef­fi­ciency aris­ing out of such re­align­ment in sup­ply chain de­signs is likely to trans­late into 15-20 per cent lower lo­gis­tics ex­penses for ma­jor FMCG and white goods play­ers over the next two to three years. The syn­er­gies from such con­sol­i­da­tion are only to be re­alised FY20 on­wards. Also, the in­tro­duc­tion of e-Way Bill is likely to en­hance the speed of freight trans­porta­tion and would thus, sup­port as­set turnover for trans­port op­er­a­tors, al­beit some neart­erm chal­lenges will ex­ist for smaller play­ers.

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