ICRA expects Indian construction companies to maintain robust revenue growth in FY2025, forecasting a year-on-year (YoY) increase of 12-15 per cent, driven by a strong order book and the government’s continued focus on infrastructure development. The projected growth is backed by an aggregate order book-to-sales ratio of 3.1x as of June 2024, indicating solid revenue prospects over the medium term.
Chintan Lakhani, Vice President and Sector Head – Corporate Ratings, ICRA, noted, “The fresh order inflows remained modest during Q1 FY2025, mainly due to the General Elections, akin to the FY2020 election period. The order-awarding activity has picked up from Q2 FY2025 onwards; nevertheless, the order inflows in FY2025 are likely to slightly trail those seen in FY2024e. Order inflows in the road segment have remained muted during the last three-four quarters; however, in other segments like urban infrastructure, drinking water, and sewage treatment projects, the inflows continue to remain healthy.”
ICRA highlighted that competition across sub-segments such as railways, roads, irrigation, and urban infrastructure has intensified. In particular, road projects awarded by MoRTH/NHAI are facing increased competitive pressure, resulting in many bids being awarded at a discount compared to the authority’s base price. Despite expectations of strong revenue growth and operating leverage, operating margins are predicted to stay flat at around 11 per cent ± 25bps in FY2025.
ICRA maintains a stable outlook for the sector, with steady growth in operating income, moderate leverage, and solid coverage metrics. However, the expiration of the Atmanirbhar Bharat scheme-related relaxations in March 2024 is expected to elongate the cash conversion cycle. Debt levels are anticipated to rise to support higher working capital needs, though operational leverage benefits are likely to sustain the interest cover ratio at around 3.6-3.9 times in FY2025.