ICRA has projected an 8–10 per cent year-on-year growth in operating income (OI) for India’s construction sector in FY2026, supported by a healthy order book and improved execution momentum. This outlook comes on the back of a muted FY2025, which was impacted by the Model Code of Conduct (MCC), prolonged monsoons, and transition to milestone-based billing. The estimated growth, however, marks a moderation from the robust ~15 per cent CAGR witnessed during FY2018 to FY2024.
According to ICRA, the aggregate order book-to-operating income ratio for its sample set of entities is expected to stand at approximately 3.5 times as of March 31, 2025. This indicates strong revenue visibility and growth potential in the medium term. However, after witnessing a subdued 1.5 per cent YoY growth during H1 FY2025, the overall operating income growth for FY2025 is estimated at just 1–3 per cent.
Providing further insights, Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings, ICRA, stated:
“The aggregate order book/OI for ICRA’s sample set of entities is estimated at ~3.5 times as on March 31, 2025, reflecting healthy growth prospects and revenue visibility. Although the order inflows in FY2025 are likely to trail those seen in FY2024, the pick-up in order awarding activity from Q3 FY2025 onwards is expected to result in a satisfactory order book position. The contractors, focussed largely on the road segment, are likely to under-perform compared to broader trends owing to slowdown in order-awarding activity from the MoRTH/NHAI. Several mid-sized road construction entities have order book/revenue of less than 2.0 times, indicating imminent stress on their revenue prospects in FY2026. Diversified players, especially those focussing on urban infrastructure, renewable and water-related projects are anticipated to perform relatively better in the current fiscal.”
ICRA noted that sub-segments such as railways, roads, and urban infrastructure continue to face intense competition, with several road projects under MoRTH/NHAI being awarded at steep discounts. Margins are expected to remain steady within the 10.5–11.0 per cent range for FY2025 and FY2026, supported by relatively stable input costs and operating leverage, though down from the 13–14 per cent levels seen in FY2021.
The expiry of Atmanirbhar Bharat relief measures has already stretched the working capital cycle, and debt levels are projected to rise to meet funding needs. Nevertheless, interest coverage is expected to remain adequate at 3.6–3.9 times in FY2026. Based on moderate leverage and stable debt metrics, ICRA has maintained a Stable outlook for the construction sector.