Greater Noida (Business Desk):Rating agency ICRA has revised its revenue growth projection for the construction industry for FY2026 to 6–8%, down from the earlier estimate of 8–10%, citing continued headwinds in road-awarding activities and slowdown in project execution under the Jal Jeevan Mission. However, a recovery is expected in other segments like urban infrastructure and irrigation, which could lead to a better performance compared to the flattish growth witnessed in FY2025.
Despite the challenges, ICRA maintains a Stable Outlook for the construction sector, with the industry’s aggregate order book-to-operating income (OI) ratio estimated at around 3.5 times as of March 31, 2026. This is a slight improvement from the 3.4 times recorded a year earlier and provides adequate revenue visibility for industry participants.
According to Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings at ICRA, the sector witnessed a 19% year-on-year decline in order inflows in FY2025, mainly due to disruptions caused by the General Elections in the first half of the fiscal. Contractors focusing primarily on the road segment are likely to underperform in FY2026 due to reduced awarding activity by the Ministry of Road Transport and Highways (MoRTH) and NHAI. Many mid-sized road construction firms currently have an order book-to-revenue ratio of less than 2.0 times, well below the industry average, signaling potential stress ahead.
In contrast, companies with exposure to urban infrastructure and energy sectors are projected to sustain double-digit revenue growth during the current fiscal.
ICRA also noted that most road projects awarded under MoRTH/NHAI were secured at significant discounts, highlighting heightened competition. Competitive intensity has also increased in other sectors like Metro, Water Supply, and Sanitation, with new players entering the space to diversify their portfolios. As a result, operating margins are expected to stay range-bound between 10.25–10.75% in FY2026, nearly the same as 10.6% in FY2025, but notably lower than the 13.0–14.0% margins recorded in FY2021.
Further, the cash conversion cycle has been affected due to the expiry of Atmanirbhar Bharat relief measures and delays in payments under the Jal Jeevan Mission. While debt levels are likely to rise to meet increasing working capital needs, ICRA estimates the interest coverage ratio to remain healthy at 3.5–3.8 times in FY2026 due to operational leverage.
Despite margin pressures and funding constraints, ICRA’s overall assessment signals resilience and adaptability within the sector, driven by segmental diversification and steady project pipelines.
