Shipping industry’s FY23 margins may fall to 25-30%: Crisil | The Financial Express

Shipping industry’s FY23 margins may fall to 25-30%: Crisil

“The correction in charter rates across segments is also expected to affect player revenues to some extent,” it said on Monday.

Shipping industry’s FY23 margins may fall to 25-30%: Crisil
The industry’s high margins in FY21 and FY22 were because of historically high charter rates in the container and dry bulk segments.

Margins of the domestic shipping industry may decline to 25-30% in the current fiscal, after hovering between 33-38% in the last two fiscal years, as charter rates across segments are likely to fall, rating agency Crisil said.

“The correction in charter rates across segments is also expected to affect player revenues to some extent,” it said on Monday. The Indian shipping industry largely consists of tanker vessels, which account for around 57% of the overall fleet pie.

The container segment is the next largest, accounting for a distant 22% share. Hence, the Indian shipping industry’s profitability is largely swayed by the tanker segment. The industry’s high margins in FY21 and FY22 were because of historically high charter rates in the container and dry bulk segments.

“The outsized impact of the lower share container segment will percolate into fiscal 2023 as well, with limited ship movement, on account of likely decline in trade leading to a slight contraction in overall industry margins. That said, the margins will still be higher than the pre-pandemic level owing to favourable dynamics, which have lowered the variable expenses of shippers,” Crisil said.

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Container shipping charter rates touched historical highs in 2021. Charter rates were up 156% on-year for the first seven months of the current year as well. However, over the remaining months, the rates are expected to decline, though still ending the year 40-70% higher, it said.

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Crisil expects charter rates to slide a further 30-50% in 2023 on account of the expected recessionary environment in majority of the consumption economies and the consequent fall in demand for discretionary goods. However, while trade has sustained so far, the growth rate in 2022 is expected to be lower on-year due to inflationary pressures crimping demand for discretionary goods in the second half.

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