Mumbai, October 27 (Monday): India’s domestic commercial fleet operators are projected to register 8–10% revenue growth in FY26, supported by robust domestic consumption, import-related demand, and the government’s infrastructure push, according to a new report released by Crisil Ratings.
The growth outlook builds upon a 12–13% CAGR achieved over the four years through FY2025, reflecting the sector’s resilience despite muted export activity.
Strong domestic momentum offsets global slowdown
The Crisil analysis, which covers 40 fleet operators accounting for nearly one-fourth of industry revenues, reveals that domestic demand contributes 65–70% of operators’ revenue, with the balance coming from export-import traffic.
“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 noted that growth in consumption and freight-intensive sectors, coupled with better road networks, will cushion the sector against weaker export volumes due to higher US tariffs.
Utilisation, margins, and regulatory tailwinds
Fleet utilisation is expected to rise to 86–87% this fiscal from 85% last year, even amid fleet additions. The improved utilisation will help sustain operating margins at 8.0–8.5%, despite cost pressures from new regulatory norms mandating air-conditioned cabins in new fleets starting October 2025.
The reduction in Goods and Services Tax (GST) on commercial vehicles from 28% to 18% has also lowered acquisition costs, providing a boost to capital expenditure (capex).
Crisil estimates industry-wide capex at Rs 1,200–1,300 crore in FY26, up 15% compared with the average over the past three years.
“Focus on expanding fleet to meet higher demand amid increasing utilisation and mandatory AC cabin implementation will result in increased capex from this fiscal,” said Shalaka Singh, Associate Director at Crisil Ratings. She added that 80–90% of this capex will be debt-funded, aided by lower total ownership costs after the GST revision.
Credit metrics remain stable despite higher leverage
Despite higher borrowings, the sector’s financial health is expected to stay strong. Gearing levels are projected to remain below 0.5x, while interest coverage could exceed 6.5x in FY26, compared with about 0.5x and 6x, respectively, in the previous fiscal.
Crisil highlighted ongoing government initiatives such as PM Gati Shakti, Bharatmala, Sagarmala, Dedicated Freight Corridors, and Multi-modal Logistics Parks as structural drivers of growth and efficiency.
However, the agency cautioned that geopolitical risks, interest rate fluctuations, and volatile domestic diesel prices remain potential headwinds.
Overall, Crisil expects higher revenues and stable margins to generate improved cash flows, enabling operators to partly fund working capital needs internally while limiting dependence on short-term debt.
