Domestic demand to drive fleet operators’ revenues to grow 8-10%: Crisil

Domestic commercial fleet operators would clock 8-10% revenue growth this fiscal, building on a compound annual growth rate (CAGR) of 12-13% over the four years through fiscal 2025, Crisil Ratings said in a study.

Strong domestic and import related fleet requirement would drive growth even as export-related demand growth remains modest, it said.

“Higher demand will increase fleet utilisation to 86-87% this fiscal from 85% last fiscal despite fleet additions. As a result, operating margins will remain stable, even as operational costs are set to increase due to the regulatory requirement of adding air conditioning (AC) to cabins of new fleet from October 2025,” the rating agency said.

Further, the cost of acquisition of new fleet would reduce due to the recent reduction of Goods and Services Tax (GST) on commercial vehicles to 18% from 28%.

Himank Sharma, Director, Crisil Ratings said, “The government’s infrastructure push will enable faster turnarounds and improved efficiencies for fleet operators, cranking up their volume throughput.”

“Hence, growing demand from consumption and freight-intensive sectors, and better roads should offset the impact of higher US tariffs on export volume. Thus, fleet operators will see revenues grow, riding on buoyant domestic consumption,” he added.

Even as revenues rise, fuel cost—accounting for 43-45% of the total cost—would also see a marginal increase as AC cabins become mandatory for new fleet. Trip related and other operational costs would also rise, too, though most of these costs would be passed through to customers.

However, increased fleet utilisation would ensure operating margins remain stable at 8.0-8.5%, the rating agency said.

Additionally, higher revenues and stable margins would result in improving cash flows, partially funding the incremental working capital requirement. Dependence on external short-term debt would be limited, while the operators would undertake sizeable fleet additions funded by long-term debt, riding on continued strong demand, it said.