Domestic shipping companies could see revenues continue to decline in FY2024-25, although at a much slower rate than in the ongoing fiscal year, as charter rates normalise, Crisil Ratings said in a study.
Revenue drop
Crisil has projected a revenue drop of 5-7% in the next financial year for Indian shipping companies following an estimated steeper fall of 23-25% this fiscal year.
The decline, however, would be at a much softer rate than in the ongoing financial year, the rating agency said, adding that it expects the credit profile of domestic shipping companies to remain stable due to healthy cash flows and limited debt addition.
“We are seeing charter rates for crude and product tankers correcting 20-25% this fiscal from the average of $50,000/day last fiscal, as global uncertainties (caused by covid-19 followed by geopolitical conflicts) ease,” Anuj Sethi, senior director at Crisil Ratings, said as part of the study.
Credit rating agency
The credit rating agency also expects that for dry bulk shipments, charter rates are expected to remain stable this fiscal year and the next, with moderate growth in demand for key commodities, especially iron ore and coal.
Average charter rates had declined during the previous fiscal year due to lower demand for these and other key commodities due to subdued industrial and construction activities in major economies, Crisil said.
Crisil, however, said that any trade disruptions, including escalation of the conflict in West Asia, impacting charter rates, adverse movement in fuel costs, or any regulatory changes that could impact fleet utilisation could alter performance expectations.
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