Indian construction sector projected to see 12-15 pc growth in FY25: Report

New Delhi: Riding on the government’s big infrastructure drive, the construction sector in the country is estimated to grow 12-15 per cent in FY25, a report said on Wednesday.

The government has kept FY25 capex outlay at Rs 11.11 lakh crore, higher than last year’s revised estimate of Rs 9.5 lakh crore.

According to credit rating agency ICRA, Indian construction entities will maintain healthy revenue growth this fiscal, aided by an adequate order book position and the government’s thrust on infrastructure activity.

“The aggregate order book-to-sales ratio of a sample set of companies remained stable at 3.3 times as of March 2024 (3.4 times during March 2023), thereby indicating healthy revenue growth prospects over the medium term,” said Chintan Lakhani, Vice President and Sector Head-Corporate Ratings, ICRA.

Certain construction entities have witnessed pressure on road sector-related order inflows in FY2024, in the backdrop of muted order awarding from the Ministry of Road Transport and Highways.

“However, diversification into other segments like drinking water, metro segment, or railway station development has helped them sustain their order book. ICRA expects the revenue growth to remain healthy at 12-15 per cent in FY25,” the credit rating agency maintained.

Over the past five years ending March 2024, the order book of the rating agency’s sample construction companies has remained between 3.3-4 times of operating income, supported by the government’s increased capital outlay towards the infrastructure sector.

The Budget has allocated a massive Rs 11.11 lakh crore for the infrastructure sector comprising highways, ports, railways and power plants, and plans to continue with this plan for the next five years to accelerate growth and create more jobs.

Meanwhile, the National Highways construction increased by 3 times from 11.7 km per day in FY14 to 34 km per day by FY24 while capital expenditure on Railways has increased by 77 per cent in the last five years.

In FY24, new terminal buildings at 21 airports have been operationalised which has led to an overall increase in passenger handling capacity by approximately 62 million passengers per annum.