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Construction Sector to Rebound with 6-8% Revenue Growth in 2026-27: ICRA

The construction sector is expected to see muted revenue growth of 2-4% in 2025-26, following a flat 2024-25. However, ICRA projects a rebound to 6-8% growth in 2026-27, led by a recovery in road sector awards and extended Jal Jeevan Mission projects. Diversified EPC players focused on urban infrastructure, mining, and power are forecast to outperform road-focused contractors facing intense competition. The sector's operating profitability is expected to remain under pressure due to geopolitical impacts on input costs and heightened competition.

Key Points: Construction Revenue Growth to Hit 6-8% in 2026-27: ICRA

  • Muted 2-4% growth in 2025-26
  • 6-8% rebound expected in 2026-27
  • Road sector and Jal Jeevan Mission slowdown cited
  • Diversified EPC players better placed
  • Operating profitability under pressure
3 min read

Revenue growth of construction players to improve by 6-8% in 2026-27: ICRA Report

ICRA report forecasts a construction sector rebound to 6-8% revenue growth in 2026-27 after muted years, driven by road and water project recovery.

"ICRA anticipates order inflows to expand by around 10% in 2026-27, led by a recovery in the road sector awards and JJM projects. - Suprio Banerjee"

New Delhi, March 30

Rating agency ICRA highlighted that the revenue growth of construction players hit a speed bump in 2025-26, with road focussed contractors among the worst hit. The construction sector is likely to witness a muted revenue growth of 2-4 per cent in 2025-26, after an almost flat performance in 2024-25, according to an analysis by ICRA.

However, it expects the industry to witness a revenue growth of 6-8 per cent in 2026-27 after two bleak years.

Shrinking order book of road contractors amid muted project awarding by the Ministry of Road Transport and Highways (MoRTH) and slowdown in Jal Jeevan Mission (JJM) related construction projects were among the key reasons behind the slowdown.

However, EPC (engineering, procurement & construction) players that are focussed on urban infrastructure projects, mining, power and irrigation sectors continued to witness a healthy growth.

While order inflows in 2025-26 benefitted from higher awards in mining and water segments, recovery in road awarding remained gradual, with ICRA expecting a more meaningful pick-up from 2026-27, aided by healthy budgetary capex and an improvement in execution.

ICRA expects the industry to witness a revenue growth of 6-8 per cent in 2026-27 against 2-4 per cent in 2025-26 (estimated).

Giving more insights, Suprio Banerjee, Co-group Head, Corporate Ratings, ICRA, said: "ICRA anticipates order inflows to expand by around 10% in 2026-27, led by a recovery in the road sector awards and JJM projects, with the latter witnessing an extension in timeline till December 2028, with higher outlay."

"Diversified EPC players will continue to be better placed with expected revenue growth of 8-10% in 2026-27, compared to road-focused entities that continue to face pressure in terms of order addition and intense competition," he added.

Majority of the road projects under MoRTH/NHAI were awarded at a sizeable discount compared to the base price, indicating accentuated competition. The competition for other sectors (Metro, and Water Supply and Sanitation) has also intensified, with new entrants trying to diversify their order book.

ICRA expects the operating profitability for construction companies to stay in the range of 10.3-10.8 per cent in 2025-26, and 10.1-10.6 per cent in 2026-27, owing to pressure on bitumen prices, driven by geopolitical tensions in West Asia, and intense competition in the sector. This, however, remains a sharp drop from 13.0-14.0% recorded in 2020-21, reflecting stiff competition for quality projects in the flagship sectors like roads.

The cash conversion cycle elongated in 2024-25 following the expiry of Atmanirbhar Bharat related relief measures and was also impacted in 2025-26 due to delay in payments under JJM. With extension in JJM, ICRA expects the receivable cycle of JJM focussed players to improve. Given the increase in debt levels and interest costs post the expiry of Atmanirbhar Bharat related relief measures, the interest coverage is expected to decline to 3.2-3.5 times in 2025-26 and further to 3.1-3.4 times in 2026-27, with continuing pressure on margins.

"Road focused players are expected to witness pressure on their credit profiles, amid declining margins and muted revenue visibility. The diversified players are likely to benefit from continued investments in power, urban infrastructure and water (drinking and sanitation) segments. The leverage metrics remain at comfortable levels, which lend support to the credit profiles of industry participants. Accordingly, ICRA maintains a Stable outlook on the construction sector," Banerjee added.

- ANI

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Reader Comments

P
Priya S
The key takeaway is diversification. Companies that only do roads are struggling, while those in urban infra, power, and irrigation are doing well. It's a lesson for the entire sector – don't put all your eggs in one basket. The extension of Jal Jeevan Mission is a positive sign for water-focused players. 💧
R
Rahul R
Intense competition leading to bids at a "sizeable discount" is worrying. It might win projects now but can hurt quality and company health later. Profit margins have already fallen from 13-14% to ~10%. Hope NHAI ensures quality isn't compromised for low bids.
A
Aman W
The delay in payments under JJM is a major pain point for small and mid-sized contractors. They run on thin margins and such delays cripple cash flow. Glad ICRA has highlighted this and hopes the extension improves the receivable cycle. Timely payments are crucial for a healthy sector.
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Michael C
Interesting analysis. The geopolitical impact on bitumen prices is a global factor affecting local profitability. It shows how interconnected everything is. The stable outlook is reassuring for investors, but the pressure on road-focused companies is clear. Diversification seems to be the winning strategy.
K
Kavya N
While the report is comprehensive, I respectfully think it underplays the human impact. Two "bleak years" means potentially less work for lakhs of daily wage laborers dependent on construction, especially roads. The recovery in 2026-27 needs to be stronger and faster. The focus should be on job creation.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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