27.1 C
Delhi
Thursday, October 1, 2020

‘Economy unlock will curb fleet operator revenue fall to 15% this fiscal’

- Advertisement -

Prolonged COVID-19 outbreak to impact Indian industry: CRISILNew Delhi, Aug 29 (IANS) A likely surge in freight demand as economic activities return to normal will contain the fall in fleet operator revenue to 15 per cent this fiscal, domestic rating agency Crisil said on Friday.

The agency said that though operators revenue fall may be contained, lower fleet utilisation and limited ability to pass on higher fuel cost will moderate their operating profitability by 240-260 basis points (bps).

The analysis is based on Crisil rated 48 fleet operators predominantly in trucking operations.

The impact on credit profiles of these operators, however, is expected to be limited over the medium term given the liquidity buffer created by the moratorium on loan repayments allowed by the Reserve Bank of India and the likely rebound in freight demand in the second half of this fiscal.

While essential goods were allowed to be transported, industrial and economic activities were minimal during the stringent first phase of the nationwide lockdown between late March and early May. Overall, freight demand — which has a high correlation with industrial and economic activity — nearly halved in the first quarter.

According to Nitin Kansal, Director, Crisil Ratings, “With the gradual unlocking of industrial and economic activities, fleet utilisation should improve to 80-90 per cent of the pre-pandemic levels during the second quarter. Demand for diesel has already rebounded 80 per cent and e-way bills generation 90 per cent by July. Recovery to business-as-usual is possible in the third quarter if things keep improving.”

But improving fleet utilisation alone won’t restore sector profitability. Fuel constitutes more than 50 per cent of the operating cost. While diesel prices are 12-14 per cent higher on-year, freight rates on major metro routes have not yet increased commensurately.

Such limited ability to pass on higher cost and sub-optimal load balancing on key routes would keep the profitability of fleet operators under pressure, Crisil said.

The operating margin is expected to slip 240-260 basis points (bps) year-on-year to 5.3 per cent this fiscal, casting a shadow on their credit metrics, the rating agency’s report added.

Nitesh Jain, Director at Ratings, said: “The credit metrics of fleet operators will moderate this fiscal. We expect interest coverage and debt service coverage ratio (DSCR) – after factoring in the moratorium – “to slide to 3.0 times and 1.2 times, respectively, compared with 4.0 times and 1.8 times last fiscal. So cash accruals will be impacted in the first half, but the moratorium will lend some cushion.”

Improvement in cash flows in the second half as demand normalises, and judicious capital expenditure should limit the impact on credit profiles. That would put fleet operators in a better position to meet debt obligations as average DSCR for the sector is expected to be comfortable at 1.5 times for the second half of this fiscal.

The Crisil analysis is based on large fleet operators (average revenue of Rs 300 crore in fiscal 2020) having better resilience. Those with relatively fewer owned trucks in their fleet will fare better on coverage of fixed costs compared with those with more. The forecast presumes a base-case scenario of GDP contracting 5 per cent. The dynamics could change as the situation is evolving continuously. The pace of economic recovery, diesel prices, and freight rates will be the key monitorables.

Source: IANS

India Updates
India Updates is an independent news & Information website. Follow us for regular updates on News and Information.

Follow Us On

Related News

BJP says will fight Bihar polls together with NDA partners JD(U), LJP

New Delhi, 01 Oct (PTI) The BJP on Wednesday sought to scotch speculation about differences with Union minister Ram Vilas Paswan''s Lok Janshakti Party,...

Govt opening up economy for greater pvt sector participation: Goyal

New Delhi, 1 Oct (PTI) The government is opening up the economy for greater participation of the private sector and has been working in...

Amitabh Bachchan: I am a pledged organ donor

Mumbai, 1 Oct (IANS) Amitabh Bachchan is a pledged organ donor and says he is bearing the giving of life to another.Big B shared...

Microsoft imparts digital skills to 7.7 lakh Indians in pandemic

New Delhi, 1 Oct (IANS) Microsoft on Wednesday announced it has trained close to 774,000 learners in India as part of its global skills...

Covid Casualty: India’s core industrial output down 8.5% in Aug

New Delhi, Oct 01 (IANS) The deceleration rate in the production of India's eight major industries continued in August, official data showed on Wednesday.As...

Pak violates ceasefire on LoC for 7th straight day

Jammu, Sep 30 (IANS) Pakistan continued to violate ceasefire along the Line of Control (LoC) in Jammu and Kashmir's Poonch district for the seventh...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Trending Topics In India

Covid 19 India Updates

New unlock guidelines: States free to decide on schools reopening after Oct 15

New Delhi, Sep 30 (IANS) : The Ministry of Home Affairs (MHA) on Wednesday left it to the states and union territories to decide on...

New unlock guidelines: States free to decide on schools reopening after Oct 15

New Delhi, Sep 30 (IANS) : The Ministry of Home Affairs (MHA) on Wednesday left it to the states and union territories to decide on...

Moderna’s Covid vax shows promise in protecting older adults

New York, Sep 30 (IANS) US-based biotech company Moderna's Covid-19 vaccine candidate has shown signs of working in older adults, new results from an...

Serum Institute to manufacture 200mn doses of Covid-19 vaccine

New Delhi, Sep 29 (IANS) A further collaboration among the Serum Institute of India (SII), the world's largest vaccine manufacturer by volume, Gavi...

87million were likely exposed to Covid-19, 1 in 15 had antibodies

New Delhi, Sep 29 (IANS) The key findings of the second round of sero-survey conducted by the Indian Council of Medical Research (ICMR) suggested...

Health ministry launches web portal for COVID-19 vaccine updates

New Delhi, Sep 28 (PTI) The Union Health Ministry on Monday launched a web portal that will provide all important information on COVID-19, vaccine...

Trending News In India

Will not allow any damage to eco-sensitive zone via mining: SC

New Delhi, Sep 30 (IANS) Chief Justice of India S.A. Bobde on Wednesday said the Supreme Court will not allow any damage to the...

Govt opening up economy for greater pvt sector participation: Goyal

New Delhi, 1 Oct (PTI) The government is opening up the economy for greater participation of the private sector and has been working in...

Amitabh Bachchan: I am a pledged organ donor

Mumbai, 1 Oct (IANS) Amitabh Bachchan is a pledged organ donor and says he is bearing the giving of life to another.Big B shared...

Microsoft imparts digital skills to 7.7 lakh Indians in pandemic

New Delhi, 1 Oct (IANS) Microsoft on Wednesday announced it has trained close to 774,000 learners in India as part of its global skills...

Covid Casualty: India’s core industrial output down 8.5% in Aug

New Delhi, Oct 01 (IANS) The deceleration rate in the production of India's eight major industries continued in August, official data showed on Wednesday.As...

Pak violates ceasefire on LoC for 7th straight day

Jammu, Sep 30 (IANS) Pakistan continued to violate ceasefire along the Line of Control (LoC) in Jammu and Kashmir's Poonch district for the seventh...

Trending Showbiz

Multiplexes to reopen with 50% seating from Oct 15

New Delhi, Sep 30 (IANS) In its latest guidelines for further reopening, the Union Home Ministry has allowed certain activities such as functioning of...

Multiplexes to reopen with 50% seating from Oct 15

New Delhi, Sep 30 (IANS) In its latest guidelines for further reopening, the Union Home Ministry has allowed certain activities such as functioning of...

AIIMS, CBI looking at legal aspects before reaching logical conclusion in SSR case

New Delhi, Sep 29 (IANS) The Forensic Department of the All India Institute of Medical Sciences (AIIMS), which has been roped in by the...

We are conducting probe into Sushant case professionally, says CBI

New Delhi, Sep 28 (IANS) Days after Vikas Singh, lawyer of Sushant Singh Rajput’s family, sought updates in the Central Bureau of Investigation (CBI) investigation, the...

NCB seizes phones of Deepika, Rakul, Simone, Karishma in drugs case

Mumbai, Sep 26 (IANS) The Narcotics Control Bureau (NCB), which quizzed Bollywood actors Rakul Preet Singh, Deepika Padukone, her former manager Karishma Prakash, and...

NCB quizzes Deepika, Sara, Shraddha in drug case related to SSR death

Mumbai, Sep 26 (IANS) The Narcotics Control Bureau (NCB) on Saturday questioned Bollywood divas Deepika Padukone, Sara Ali Khan, Shraddha Kapoor for several hours...

Trending Sports

All-round effort helps SunRisers notch first win

Abu Dhabi, Sep 30 (IANS/GloFans) SunRisers Hyderabad (SRH) finally opened their account -- the last of the eight teams to do so -- with clinical...

Kohli wins Super Over thriller for RCB, Kishan’s 99 in vain

Dubai, Sep 29 (IANS/GloFans) In yet another roller-coaster contest, Royal Challengers Bangalore (RCB) edged out Mumbai Indians (MI) in a Super Over tie-breaker - the...

ICC gets recognition for two digital initiatives in Leaders in Sports Awards

Dubai, Sep 28 (PTI) The International Cricket Council (ICC) has been recognised for its twin digital initiatives at the prestigious Leaders in Sports Awards...

Played nearly 500 games, can speak to any player says Ganguly

Kolkata, Sep 28 (PTI) His nearly "500 international match experience" gives him the right to speak and guide any player "be it Shreyas Iyer...

Went through rigorous physical, mental transformation for 1996 Olympics, says Paes

New Delhi, Sep 28 (IANS) The year was 1996 and no Indian had won an individual medal at the Olympics 44 years prior to...

Sensational Tewatia hits five sixes in an over as RR defeats KXIP

Sharjah, Sep 28 (PTI) Rahul Tewatia struck five sixes in an over at the fag end of the match as Rajasthan Royals recorded the...

Latest Trending News In India

BJP says will fight Bihar polls together with NDA partners JD(U), LJP

New Delhi, 01 Oct (PTI) The BJP on Wednesday sought to scotch speculation about differences with Union minister Ram Vilas Paswan''s Lok Janshakti Party,...

Govt opening up economy for greater pvt sector participation: Goyal

New Delhi, 1 Oct (PTI) The government is opening up the economy for greater participation of the private sector and has been working in...

Amitabh Bachchan: I am a pledged organ donor

Mumbai, 1 Oct (IANS) Amitabh Bachchan is a pledged organ donor and says he is bearing the giving of life to another.Big B shared...

Microsoft imparts digital skills to 7.7 lakh Indians in pandemic

New Delhi, 1 Oct (IANS) Microsoft on Wednesday announced it has trained close to 774,000 learners in India as part of its global skills...

Covid Casualty: India’s core industrial output down 8.5% in Aug

New Delhi, Oct 01 (IANS) The deceleration rate in the production of India's eight major industries continued in August, official data showed on Wednesday.As...