The revenue of Indian construction companies is expected to increase by 8-10% in FY2025, as compared to 15-18% in FY24, according to ICRA. As per the reports, the extended monsoon season, milestone-based billing in Q2 FY2025 (instead of monthly billing till March 2024), and the Model Code of Conduct in Q1 FY2025 all hindered construction activity. ICRA expects that the execution pace of Indian construction businesses would pick up in H2 FY2025 and that operational income will rise on a YoY basis by 8–10% in FY2025 and 10-12% in FY2026, though at a slower rate than the long-term CAGR of roughly 15% for the FY2018–FY2024 period. 

“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,” said Suprio Banerjee, Vice President and Co-Group Head - Corporate Ratings, ICRA. Banerjee further added, “The cash conversion cycle is expected to sustain at the current levels, given that the expiry of the Atmanirbhar Bharat relief measures have already elongated the working capital cycle for the players in FY2025. While debt levels are expected to increase to support the higher working capital requirements, the corresponding operational leverage benefits are anticipated to keep the interest cover adequate at around 3.6-3.9 times in FY2026e. Given the moderate leverage and satisfactory debt coverage metrics, ICRA maintains a stable outlook on the construction sector.”