The construction activity, primarily for road players, was impacted by the model code of conduct in Q1FY25 and an elongated monsoon period, along with milestone-based billing (against monthly billing till March 2024) in Q2FY25, stated a report by ICRA. The impact is reflected in the modest revenue growth of approximately 1.5 per cent in year-on-year terms in H1FY25 for ICRA’s sample set of 19 companies (with combined turnover of Rs 1.28 trillion in FY2024).
According to analysis by ICRA, the execution pace of Indian Construction entities is expected to pick up in H2FY25 and operating income is estimated to grow by 8-10 per cent on a YoY basis in FY25 and 10-12 per cent in FY2026, though easing from the long-term CAGR of around 15 per cent for the FY2018-FY2024 period. ICRA stated that in FY2023 and FY2024, the construction entities had witnessed a YoY growth of 22 per cent and 19 per cent, respectively.
Also ReadVodafone Idea unlikely to have aggressive 5G pricing strategy
Suprio Banerjee, Vice President and Co-Group Head – Corporate Ratings, ICRA, said, “The fresh order inflows were modest in H1 FY2025, mainly due to the impact of the General Elections and the monsoons. Though the order-awarding activity has picked up from Q2 FY2025 onwards, the order inflows in FY2025e are likely to trail those seen in FY2024. Order inflows in the road segment have remained muted during the last four quarters; however, in other segments like urban transportation (including metro), drinking water and sewage treatment projects, the inflows remain healthy.”
Within the various sub-segments, because of a relatively moderate order book, the entities focused on Central Government road projects are expected to witness pressure on revenue in FY2025, thereby dragging the overall growth rate, he added.
Per the report, the competition has remained high across sub-segments like railways, road as well as urban infrastructure in recent years. Among these, road projects awarded by the MoRTH/NHAI have witnessed greater competitive pressure, which is also reflected in the majority of the bids awarded at a sizeable discount compared to the authority’s base price. The competition for other sectors like Metro, Railways, and Water Supply & Sanitation, has also increased, with new entrants trying to diversify their order book.
Owing to the heightened competition,
» Read More
