Emerging construction firms to post steady 9–11% revenue growth in FY26: Crisil
IANS
Synopsis
Crisil Ratings projects a stable 9-11% revenue growth for emerging diversified construction firms in 2025-26, fueled by healthy order books and timely project execution. Despite this growth, operating margins will be capped at 10-11% due to commodity price volatility and increased competition.
By PTI
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Emerging diversified construction firms are expected to witness stable growth in 2025-26, with revenues projected to rise by 9-11 per cent, Crisil Ratings said on Tuesday.
"Emerging diversified construction companies will continue to see steady growth this fiscal, with revenues growing 9-11 per cent compared with a 15 per cent compounded annual growth rate in the five fiscals through 2025," it said in a statement.
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However, limited ability to pass on the impact of sharp commodity price fluctuations and stronger competition will limit the operating margins to 10-11 per cent. While the working capital requirements of emerging construction companies will be higher on-year, it will be funded mainly by better cash flows and risk management practices, thus limiting fund-based working capital bank borrowings.
Timely execution of a sizeable order book will also entail debt-funded capex for equipment purchases. Nevertheless, strong cash flows will ensure leverage levels are under control, thereby supporting the credit profiles of companies.
"The government's thrust on infrastructure and better access to funding continue to support the growth of emerging corporates in the diversified construction industry. Diversity in the order book should enable these players to log another year of steady revenue growth. However, profitability will remain flat on-year as competition within the segment intensifies and subcontracting charges remain in check," Crisil Ratings Senior Director Rahul Guha said.
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Healthy order books, driven by the timely execution of projects, supporting their credentials, have resulted in the continued scale-up of operations, it said."Emerging diversified construction companies will continue to see steady growth this fiscal, with revenues growing 9-11 per cent compared with a 15 per cent compounded annual growth rate in the five fiscals through 2025," it said in a statement.
Also Read: Godrej Properties acquires 14-acre land in Pune to build housing project worth Rs 4,200 cr
However, limited ability to pass on the impact of sharp commodity price fluctuations and stronger competition will limit the operating margins to 10-11 per cent. While the working capital requirements of emerging construction companies will be higher on-year, it will be funded mainly by better cash flows and risk management practices, thus limiting fund-based working capital bank borrowings.
Timely execution of a sizeable order book will also entail debt-funded capex for equipment purchases. Nevertheless, strong cash flows will ensure leverage levels are under control, thereby supporting the credit profiles of companies.
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An analysis of 200 emerging diversified construction companies, with estimated aggregate revenue of Rs 1 lakh crore last fiscal-about a tenth of the country's total infrastructure spend-indicates as much."The government's thrust on infrastructure and better access to funding continue to support the growth of emerging corporates in the diversified construction industry. Diversity in the order book should enable these players to log another year of steady revenue growth. However, profitability will remain flat on-year as competition within the segment intensifies and subcontracting charges remain in check," Crisil Ratings Senior Director Rahul Guha said.
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