Rating agency ICRA has projected that the revenue of the Indian construction companies for the financial year 2024-25 is estimated to grow at 8-10 per cent, slower in comparison to a growth of 12-15 per cent during previous years.
(Photo: IANS)
Rating agency ICRA has projected that the revenue of the Indian construction companies for the financial year 2024-25 is estimated to grow at 8-10 per cent, slower in comparison to a growth of 12-15 per cent during previous years.
The agency is estimating the operating income of construction companies to grow at 10-12 per cent YoY in FY26, still lower than the long-term compound annual growth rate of about 15 per cent between FY18 and FY24.
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In FY23 and FY24, the construction entities had witnessed a YoY growth of 22 per cent and 19 per cent, respectively.
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ICRA said that the slowdown is on the back of the Model Code of Conduct in the first quarter of FY25 (Q1 FY25), an elongated monsoon period, and milestone-based billing in the second quarter of FY25.
The slowdown was also reflected in the modest revenue growth of about 1.5 per cent on a year-on-year (YoY) basis in the first half of FY25 (H1 FY25) for ICRA’s sample set of 19 construction companies with a combined turnover of Rs 1.28 trillion in FY24.
Road projects awarded by the Ministry of Road Transport and Highways/National Highways Authority of India have witnessed greater competitive pressure, reflected in the majority of the bids being awarded at a sizable discount compared to the authority’s base price.
The competition for sectors like metro, railways, and water supply & sanitation has increased, with new entrants trying to diversify their order book.
The operating margins of the industry moderated from 12 per cent during FY22 to 11.1 per cent in FY24.
The credit rating agency is estimating the margins to remain range-bound around 10.5-11.0 per cent in FY25E and FY26E.
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