Operating Margins for Construction Industry Estimated to Remain Steady at 10.25 to 10.75% in FY26 For India: ICRA

Operating Margins for Construction Industry Estimated to Remain Steady at 10.25 to 10.75% in FY26 For India: ICRA

India: Amid intense competition in the sector, Icra projects operating margins of construction industry players to stabilise at 10.25–10.75% in FY26, slightly down from 10.6% in FY25 and marking a significant drop from 13–14% in FY21. The ratings firm has also revised its revenue growth forecast for FY26 to 6–8%, down from the earlier projection of 8–10%, citing continued headwinds in road-awarding activity and a slowdown in Jal-Jeevan mission-related project execution. However, segments such as urban infrastructure and irrigation are expected to see a ramp-up, leading to relatively better performance in FY26 compared to flat growth in FY25. The order book-to-operating income ratio for Icra’s sample set of 19 companies, which reported a combined turnover of almost Rs 1.3 trillion (115.7 billion USD) in FY25, is estimated at 3.5x as of March 31, 2026, up from 3.4x the previous year, offering sufficient revenue visibility.

Players active in urban infrastructure and the energy sector are expected to maintain double-digit revenue growth. Heightened competition has led to most MoRTH/NHAI road projects being awarded at steep discounts to base prices, while sectors like metro, water supply, and sanitation are also seeing increased rivalry. Despite pressure on margins due to competition, stable commodity prices and operating leverage are expected to support profitability.

Source: Business Standard