Major ports see 21% volume contraction in April due to COVID-19; sector outlook negative: Icra

Impacted by COVID-19, major ports in India witnessed a steep 21 per cent volume contraction in April and bulk cargo throughput may shrink up to 8 per cent in the current fiscal, ratings agency Icra said on Friday.

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It said the container segment may witness a decline of 12-15 per cent during the current financial year.

"The Indian port sector has been adversely impacted due to the COVID-19 outbreak and the subsequent lockdown introduced by India and other major economies.

"Although, the sector has been classified under essential services and has remained operational during the lockdown, the impact on domestic economic activity as well as slowdown in global trade has resulted in steep contraction in cargo volumes at the major ports in April 2020, with throughput decline of 21 per cent," Icra said in a statement.

While the decline was across major cargo categories, petroleum, oil and lubricant (POL), thermal coal and container segment witnessed significant contraction.

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The outlook for the port sector remains negative in the near to medium term, it added.

K Ravichandran, Senior VP and Group Head, Icra Ratings, said: "The credit profile of port sector companies is expected to witness pressure in the near to medium term, due to the impact of COVID-19 outbreak and the subsequent lockdown imposed. Further, entities that have recently commenced operations or concluded debt funded capacity expansions or have concentrated cargo profile like containers could come under severe pressure."

Nonetheless, well diversified players (cargo-wise) and SPVs promoted by stronger sponsors should have higher financial flexibility to weather this downturn and their debt servicing is unlikely to be materially impacted, he said.

Taking note of the support and concessions provided by the Ministry of Shipping to various stakeholders in the port sector, it said these include free storage, suspension of minimum guaranteed obligations during the lockdown period, deferment of revenue share/royalty for three months and reduction in lease rates to the extent of decline in volumes.

Sai krishna, Assistant Vice President and Associate-Head, Icra Ratings added: "The concessions will provide short term cash flow reliefs to PPP terminals operating at major ports, however, sustained cargo contraction post the lockdown and the need to offer discounts to revive volumes would put pressure on cash flows of the terminals, subsequently."

While all cargo segments are vulnerable, Icra said the container segment is expected to be more adversely impacted.

It said while general cargo throughput may witness 5-8 per cent contraction for full year 2020-21, the container segment may witness a decline of 12-15 per cent during the same period.