Stable margins expected despite rising costs from mandatory AC cabins and increased operational expenses
27 Oct 2025 | 1333 Views | By Shristi Ohri
India's domestic commercial fleet operators are projected to achieve 8-10% revenue growth in the current fiscal year, driven by robust domestic consumption and import-related demand, according to a report released by Crisil Ratings on Monday.
The growth builds on an impressive compound annual growth rate of 12-13% recorded over ...
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India's domestic commercial fleet operators are projected to achieve 8-10% revenue growth in the current fiscal year, driven by robust domestic consumption and import-related demand, according to a report released by Crisil Ratings on Monday.
The growth builds on an impressive compound annual growth rate of 12-13% recorded over the four years through fiscal 2025, with the sector demonstrating resilience despite subdued export-related demand.
The analysis, based on 40 fleet operators representing approximately one-fourth of the industry's revenues, indicates that domestic demand accounts for 65-70% of operators' revenues, while export-import traffic contributes the remainder.
"The government's infrastructure push will enable faster turnarounds and improved efficiencies for fleet operators, cranking up their volume throughput," said Himank Sharma, Director at Crisil Ratings. He added that growing demand from consumption and freight-intensive sectors, combined with improved road infrastructure, would offset the impact of higher US tariffs on export volumes.
Fleet utilization is expected to increase to 86-87% this fiscal from 85% last year, despite fleet additions. This improved utilization will help maintain operating margins at 8.0-8.5%, even as operational costs rise due to new regulatory requirements mandating air conditioning in cabins of new fleet from October 2025.
The sector received a boost from the recent reduction in Goods and Services Tax on commercial vehicles to 18% from 28%, which will lower the cost of acquiring new fleet. This, combined with lower interest rates, is expected to support a significant capital expenditure of Rs 1,200-1,300 crores this fiscal, representing a 15% increase over the average capex of the last three fiscals.
"Focus on expanding fleet to meet higher demand amid increasing utilisation and mandatory AC cabin implementation will result in increased capex from this fiscal," noted Shalaka Singh, Associate Director at Crisil Ratings. She emphasized that 80-90% of this capex would be debt-funded, supported by lower total cost of ownership following the GST revision.
Despite increased debt for fleet expansion, credit profiles are expected to remain stable. Gearing is projected to stay below 0.5 times, while interest coverage is anticipated to exceed 6.5 times this fiscal, compared with approximately 0.5 times and 6 times respectively last year.
The report highlighted that government infrastructure initiatives, including PM Gati Shakti, Bharatmala, Sagarmala, dedicated freight corridors and multi-modal logistics parks, would continue to support sector growth.
However, the ratings agency cautioned that geopolitical uncertainties, interest rate fluctuations, and sharp revisions in domestic diesel prices remain key factors to monitor.
Higher revenues and stable margins are expected to generate improved cash flows, which will partially fund incremental working capital requirements while limiting dependence on external short-term debt.