Revenue growth for India’s road transport fleet operators is projected to double to 9-11% this fiscal year, driven by robust domestic demand despite weak export performance. Operating margins are expected to improve by 75-100 basis points due to better fleet utilization and stable fuel costs.
An analysis by CRISIL Ratings of 45 large fleet operators, representing a quarter of the industry’s revenue, highlights these trends. The credit profile of operators is anticipated to remain strong as they moderate capital expenditure (capex) on fleet expansion following significant additions in the past three fiscals. This stability is further supported by steady working capital.
While nearly a third of freight demand comes from export-oriented sectors, which are beginning to recover, domestic sectors such as mining, industrial, manufacturing, infrastructure, and engineering goods will drive volume growth. Consequently, fleet utilization is expected to rise to over 85% this fiscal from 82-83% last year.
Himank Sharma, Director of CRISIL Ratings, commented, “Improved utilization will not only lead to revenue growth but also enhance efficiencies for operators. As diesel and fuel costs are pass-through expenses, any increases due to international price changes can be passed on to customers. With other costs remaining steady, operating margins are expected to improve to 9.0-9.5% this fiscal.”
Fleet operators expanded their fleet size by 60% over the past three fiscals as demand surged post-COVID-19 pandemic, yielding immediate returns. This fiscal, fleet additions are projected to moderate to 15% of the existing fleet size. The Ministry of Road Transport and Highways’ mandate for air-conditioned cabins for drivers starting October 2025 may result in nominal capex if operators retrofit older vehicles.
Shalaka Singh, Associate Director of CRISIL Ratings, added, “Despite large fleet expansions, capital structures and debt protection metrics have improved due to higher utilization and healthy demand. With minimal debt addition and stronger revenues and margins, credit metrics will continue to improve, ensuring healthy credit profiles for operators.”
Gearing and interest coverage are expected to remain below 0.5 times and above 7.5 times, respectively, this fiscal. However, potential impacts on freight demand due to geopolitical uncertainties, interest rate changes, or significant revisions in domestic fuel prices will require close monitoring.
