ICRA expects the construction industry in India to maintain a healthy revenue growth momentum in FY2025 with a projected year-on-year growth of 12-15% in FY2025 after witnessing a stellar 18-20% revenue growth in FY2024e.The government’s thrust on infrastructure is reflected in its increase in capex allocations to Rs 11.1 trillion (+16.9% year-on-year) in FY2025 budget estimates, which augurs well for the sector.
ICRA maintains a stable outlook on the sector with steady growth in operating income, moderate leverage, and healthy coverage metrics.Industry participants are likely to witness 25-50 bps expansion in operating margins in FY2025 to 11.5%-12.0%, in the backdrop of operating leverage benefits and expectations of relatively stable commodity prices.
Ashish Modani, vice president and co-group head – Corporate Ratings, of the company said, “However, intense competition in some of the construction sector segments remains a challenge. The overall profitability, therefore, will continue to remain below pre-Covid levels (14%+) in the medium term. With the expiry of Atmanirbhar Bharat scheme scheme, the working capital requirement is expected to increase in FY2025”
The moderation in prices of some of the key commodities during FY2024, such as steel, provides some respite to industry participants and augurs well for the construction sector.