Construction Sector Faces Tough Terrain Ahead with Slow Revenue Growth

ICRA reports muted revenue growth for construction firms in 2025-26, with road contractors facing significant challenges. Despite a sluggish 2-4% growth, the sector is poised for recovery in 2026-27 with a 6-8% growth projection. Diversified players fare better, while road-focused ones struggle amidst stiff competition.

According to a report by rating agency ICRA, construction companies are bracing for a difficult period, with anticipated revenue growth stagnating at a mere 2-4% in the 2025-26 fiscal year. The hardest hit are those contractors focused on road projects, grappling with reduced order books and meager state project allocations.

The report attributes the downturn largely to a slowdown in awards by the Ministry of Road Transport and Highways and declining projects linked to the Jal Jeevan Mission. However, firms operating in urban infrastructure, mining, and power sectors continue to thrive, showcasing healthier growth trajectories.

ICRA forecasts a better outlook for 2026-27, with an estimated revenue growth rebound to 6-8%, fueled by budgetary capex increases and improved project execution. Key insights from Suprio Banerjee, Co-group Head at ICRA, suggest that diversified EPC players are strategically positioned for an 8-10% growth, contrasting with the struggles faced by road-centric contractors.

(With inputs from agencies.)