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ICRA says FY22 port cargo volumes to remain robust, exceed pre-Covid level

With April-August cargo volumes having almost reached pre-COVID levels despite the second wave, Icra Ratings expects overall volumes at Indian ports to continue witnessing improvement through the current fiscal and even surpass FY2020 (pre-Covid) volumes.

During April-August period all segments except fertilisers have witnessed healthy year-on-year growth. The overall cargo volumes are largely stable in the period under review as against the corresponding period in FY20, driven by healthy growth in containers, iron ore and other miscellaneous segments, said the ratings agency.

“In the period under review, volumes reached almost pre-Covid levels despite the second wave of Covid-19, as economic activity improved. Overall cargo volumes are expected to grow by 7-10 percent year-on-year in FY22 and by 1-4 percent compared to FY20, driven by the economic recovery,” the report quoted Sai Krishna, assistant vice president and sector head at Icra as saying.

The positive growth can also be attributed to the base effect since the same period during last fiscal (FY2021) was most severely impacted by the pandemic-related lockdown. The exceptions to volume growth (apart from fertilisers) are POL and coal volumes which have remained subdued. POL and thermal coal segments had remained subdued in FY2021 too due to demand contraction and while there has been a year-on-year improvement in Apr-Aug FY22, the volumes remain lower compared to FY20 levels.

Cargo volumes at Indian ports had witnessed sharp contraction of 14 percent during H1 FY2021, following the strict lockdown measures imposed which had resulted in severe economic contraction. However, in H2 FY2021, except for Feb 2021, the volumes witnessed year-on-year growth driven by easing of containment measures and a pick-up in economic activity with year-on-year growth of 3 percent in H2 FY2021, said Krishna.

The sector has witnessed consolidation in the last few years, with acquisition of ports and port assets by larger players. The trend is expected to continue as some of the weaker entities or strategic standalone assets get acquired by stronger and larger players.

“In FY2021, due to lower cargo movement, the cash flows of some entities which had recently commenced operations or concluded debt-funded capacity expansions had come under pressure despite the liquidity support measures provided by the Ministry of Shipping and the RBI (Reserve Bank of India). However, as expected, the SPVs (special purpose vehicles) promoted by stronger sponsors have had the financial flexibility to weather the downturn and their debt servicing has not been materially impacted,” quoted Ravish Mehta, senior analyst, Icra Ratings as saying.

Going forward, with healthy volume growth expected for FY2022, the performance of the segment is expected to improve as they will benefit from the operating leverage. The profitability of ports should recover in FY2022 due to improved capacity utilisation and benefit of operating leverage, said Icra.
Source: Business Standard

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