Icra Says FY22 Port Cargo Volumes Remain Robust and Above Pre-Covid Level
With cargo volumes from April to August almost reaching pre-COVID levels despite wave 2, Icra Ratings expects overall volumes at Indian ports to continue to improve throughout the year current tax and even exceed the volumes for fiscal year 2020 (before Covid).
During the April-August period, all segments except Fertilizers experienced healthy year-over-year growth. Overall freight volumes are broadly stable in the period under review compared to the corresponding period of FY20, thanks to healthy growth in containers, iron ore and other miscellaneous segments, said the rating agency.
“During the period under review, volumes almost reached pre-Covid levels despite the second wave of Covid-19, as economic activity improved. -4 percent from FY20, driven by economic recovery, ”said the report, citing Sai Krishna, deputy vice president and sector head at Icra.
The positive growth can also be attributed to the base effect since the same period in the last fiscal year (fiscal year 2021) was most severely affected by the lockdown linked to the pandemic. The exceptions to the growth in volumes (excluding fertilizers) are the volumes of POL and coal which have remained low. The POL and thermal coal segments also remained modest in fiscal 2021 due to the contraction in demand and although there was a year-over-year improvement in April-August for the FY22, volumes remain lower than FY20 levels.
Cargo volumes at Indian ports experienced a sharp contraction of 14% in the first half of fiscal 2021, following the tight lockdown measures imposed which resulted in a severe economic contraction. However, in the second half of fiscal 2021, with the exception of February 2021, volumes experienced year-on-year growth driven by the easing of containment measures and an upturn in economic activity with growth of 3 % year-over-year in the second half of fiscal 2021, Krishna said. .
The sector has seen consolidation in recent years, with the acquisition of ports and port assets by larger players. The trend is expected to continue as some of the weaker entities or stand-alone strategic assets will be acquired by stronger and larger players.
“In fiscal year 2021, due to lower freight movements, the cash flows of some entities that had recently started operations or concluded debt-financed capacity extensions were under pressure despite support measures liquidity provided by the Ministry of Navigation and the RBI (Reserve Bank of India). However, as expected, SPVs (special purpose vehicles) promoted by stronger sponsors had the financial flexibility to withstand the crisis and their debt service was not materially affected, ”said Ravish Mehta, analyst. senior at Icra Ratings.
Going forward, with healthy volume growth expected for fiscal 2022, segment performance is expected to improve as they will benefit from operating leverage. Port profitability is expected to pick up in fiscal 2022 due to better capacity utilization and operating leverage advantage, Icra said.