Shipping companies may see continued revenue decline in FY25: Crisil

Indian shipping companies are poised to confront a sustained downturn in revenues through the fiscal year 2024-25, albeit at a more gradual pace compared to the ongoing financial year. Crisil Ratings, in a recent study, foresees this downward trajectory due to the anticipated normalization of charter rates.

Projections by Crisil indicate a potential 5-7% decline in revenue for Indian shipping companies in the upcoming financial year, following a notably steeper downturn of 23-25% in the current fiscal year.

In the previous fiscal year, domestic shipping entities experienced a substantial revenue surge of 35%, propelled by heightened charter rates driven by geopolitical tensions such as the Russia-Ukraine conflict and amplified post-pandemic demands from China.

Crisil's study maintains an outlook of an average operating margin holding at 33-35%, surpassing pre-pandemic levels of 25-30%. The agency anticipates that this, coupled with a conservative capital expenditure strategy, will uphold the robust credit risk profiles of shipping companies.

Anuj Sethi, senior director at Crisil Ratings, pointed out the correction of crude and product tanker charter rates by 20-25% this fiscal year from the previous average of $50,000/day. He predicted a continuation of this trend into the next fiscal year, albeit at levels surpassing pre-pandemic rates, attributing it to strong tonne-mile demand and limited new fleet introductions.

The agency's analysis also forecasts stable charter rates for dry bulk shipments in the current and upcoming fiscal years, with modest growth anticipated for vital commodities like iron ore and coal.

Crisil cautioned that unforeseen trade disruptions escalated conflict in West Asia affecting charter rates, fuel cost fluctuations, or regulatory alterations impacting fleet utilization could potentially modify performance expectations despite the current stable credit profile of shipping companies.

Despite these potential challenges, Crisil maintains that healthy cash flows and restrained debt accumulation due to a lack of significant fleet expansion plans will likely support the stability of shipping companies' credit profiles in the foreseeable future.

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