Shipping Companies To Potentially See A 5-7% Fall In Revenue In FY25: CRISIL

The firms logged a growth of 35 per cent in FY23 when charter rates increased due to geopolitical conflicts, such as the Russia-Ukraine war, and high demand from China after the pandemic

Domestic shipping companies are anticipated to log a further decline of 5-7 per cent in revenue in the next fiscal year, amid normalisation of the rates, a report by credit rating agency CRISIL said on Thursday. This fall comes after a plunge of 23-25 per cent in the revenue was seen in the current fiscal year.

Notably, the companies logged a growth of 35 per cent in the 2022-23 fiscal year when charter rates increased due to geopolitical conflicts, such as the Russia-Ukraine war, and high demand from China after the pandemic, the rating agency said. 

CRISIL further noted that the margin profile possibly varied across the companies working in different segments, however, the average operating margin is estimated to keep moderating to 33-35 per cent in the 2024-25 fiscal year (FY25) due to the correction in charter rates, reported PTI.  At the same time, it would stay above the pre-pandemic levels of 25-30 per cent, the agency predicted. This should help the shipping companies maintain a healthy credit risk profile. 

A study from the rating agency of five shipping companies reflected the same. This study included the companies which together contribute to nearly half o the about 20 million metric tonne (MMT) deadweight tonnage (DWT) of shipping fleet in India. This shipping fleet of domestic firms is dominated by tankers that carry crude oil and petroleum products (accounting for about 70 per cent of total DWT), followed by dry bulk carriers carrying unpackaged commodities like coal, iron ore, and grains (about 20 per cent), the agency said. 

CRISIL further noted that the charter rates correlate with the global demand-supply dynamics. Anuj Sethi, senior director, CRISIL Ratings, said, “We are seeing charter rates for crude and product tankers correcting 20-25 per cent this fiscal from the average of around USD 50,000/day last fiscal, as global uncertainties (caused by Covid-19 followed by geopolitical conflicts) ease.”

Sethi added that the current trend in global trade is expected to continue, charter rates are likely to moderate further ahead, however are going to potentially remain higher than the pre-pandemic level, supported by buoyant tonne-mile demand and limited new fleet deliveries.