New Delhi, Oct 27 (NationPress) Domestic commercial fleet operators are expected to achieve a revenue growth of 8-10 percent this fiscal year, building on a strong compound annual growth rate (CAGR) of 12-13 percent over the four years leading up to fiscal 2025, according to a report from Crisil released on Monday.

Growth will be driven by a robust demand for domestic and import-related fleet services, even as export demand remains relatively modest, the report highlighted.

“The government’s emphasis on infrastructure development will enable quicker turnarounds and enhanced efficiencies for fleet operators, thereby increasing their volume throughput,” stated Himank Sharma, Director at Crisil Ratings.

Therefore, rising demand from consumption and freight-heavy sectors, coupled with improved road conditions, should mitigate the effects of heightened US tariffs on export volumes.

“Consequently, fleet operators are poised to see revenue increases, buoyed by strong domestic consumption,” he added.

Demand growth will boost fleet utilization to 86-87 percent this fiscal year, up from 85 percent last fiscal year, despite new fleet additions.

This increase will help maintain operating margins, even as operational costs rise due to new regulations mandating air conditioning (AC) installations in cabins of new fleets starting October 2025.

Moreover, the cost of acquiring new fleets is expected to drop thanks to a recent reduction in the Goods and Services Tax (GST) on commercial vehicles from 28 percent to 18 percent.

As a result, credit profiles are anticipated to remain stable, even with the addition of debt for fleet expansion, the report indicates.

Domestic demand constitutes 65-70 percent of fleet operators' revenues, with the remainder stemming from export-import activities.

The report suggests that improved fleet utilization will ensure operating margins remain steady at 8.0-8.5 percent.

Additionally, increased revenues alongside stable margins will enhance cash flows, partially covering the rising working capital needs.

Reliance on short-term external debt will be minimized, while operators will pursue significant fleet expansions funded by long-term debt, driven by sustained strong demand, the report noted.

“Backed by a lower total cost of ownership following the GST changes and reduced interest rates, fleet operators are expected to embark on a substantial capital expenditure of Rs 1,200-1,300 crore this fiscal year, financed by 80-90 percent debt. This marks a 15 percent increase compared to the average capital expenditure over the past three fiscal years,” said Shalaka Singh, Associate Director at Crisil Ratings.