Rail operators likely to post double-digit growth in FY25: India Ratings

Rail operators' revenue is expected to grow into double-digit, while warehousing sector is projected to log a 3-5 per cent year-on-year growth in organic rentals this fiscal even as the demand for Grade-A space may remain intact, ratings agency India Ratings said on Friday.

For sea transport, the ratings agency said, it is expecting port volumes will be supported by the coastal movement of goods and global container freight, with the easing of geopolitical tensions, including the Red Sea crisis and the normalisation of US-bound traffic.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for container freight stations is expected to remain range-bound due to the increase in the proportion of direct port delivery and high competition intensity at large ports, according to Ind-Ra (India Ratings).

Ind-Ra has also assigned an improving outlook for the logistics industry for FY26 and said that macro-tailwinds arising from the government's multipolar investments across ports, rail, road, and air transport are expected to bode well for the industry.

Sustained investments and the resultant increased scale of operations are expected to improve cost efficiency and operational flexibility which could lead to higher profitability for Ind-Ra-rated integrated logistics companies, said Pratik Mundhada, Associate Director, Corporates, Ind-Ra.

"In Ind-Ra's base case, we see double-digit revenue growth for rail operators in FY26, supported by huge private investments in rakes and dry terminals in 2024. For warehousing entities, we project organic rental growth of 3 -5 per cent year-on-year while demand for Grade-A spaces is expected to remain intact in FY26," he stated.

Container freight stations' profitability, according to Mundhada, is likely to remain subdued in this fiscal due to intense competition.

"Lastly, for freight forwarders, revenue growth and EBITDA are likely to be impacted by a moderation in the global freight rates," he added.

The ratings agency noted that initiatives such as the National Logistics Policy and the PM Gati Shakti National Master Plan aim to enhance multimodal connectivity and foster interdisciplinary coordination.

Further, it stated that public-private partnerships are expected to expected to scale-up the ports portfolio.

Also, increased private capital expenditure towards the network expansion of trains, dry terminals, and warehousing will support the growth of the logistics market in India, it said and added that India's Logistics Performance Index ranking improved to 38 in 2023 from 44 in 2018, with an aspiration to break into the top 25 by 2030 as part of Maritime Vision 2030.

This will necessitate a reasonable budgetary allocation towards logistics infrastructure in the upcoming budget, it said.

Ind-Ra said it believes the full commissioning of the Western Dedicated Freight Corridor will improve the utilisation of rakes and terminals, thereby enhancing the operating profitability of container train operators.

On the flip side, increased competition and revisions of haulage charges will remain key monitorable. The Eastern Dedicated Freight Corridor is likely to improve supply chain efficiency for thermal plants, led by increased speed and scheduled train operations, it said.

Ratings on logistics and supply chain companies are mostly on a "Stable Outlook", given the sustenance of operational performance, while maintaining a comfortable leverage profile, Ind-Ra said.

"While we see capital investments by logistics infrastructure companies including warehousing, rail and dry terminals, their ability to raise long-term debt at a competitive pricing and Ind-Ra's expectation that these companies will be able to optimise the asset utilisation are supporting their credit profile and thereby the Stable rating Outlook," it said.