India’s construction sector is expected to maintain steady growth over the next two financial years, even as near-term momentum moderates. Rating agency ICRA has maintained a Stable outlook on the sector, projecting 8โ10% revenue growth in FY2027, marginally higher than the 6โ8% growth anticipated for FY2026. The outlook reflects resilience in select infrastructure segments, balanced by continued pressure in others.
The improvement will largely be driven by urban infrastructure, irrigation, and energy projects, even as road-focused construction entities continue to face headwinds. “ICRA expects 8-10% revenue growth for the construction sector in FY2027, which is slightly better than the 6โ8% revenue growth expected in FY2026,” said Suprio Banerjee, Vice President & Co-Group Head, ICRA Ltd.
Diversified construction companies are likely to benefit from a broader project mix and stable execution pipelines. In contrast, entities with a high dependence on road projects or the Jal Jeevan Mission could face challenges in the near to medium term due to slower order inflows and tighter execution timelines. Operating margins are projected to remain in the range of 10.3โ10.8% in FY2026e and FY2027P, supported by operating leverage benefits and relatively stable commodity prices.
“While the competitive intensity in the construction sector continues to remain high, the operating margins, supported by operating leverage benefits and stable commodity prices, are likely to keep margins stable,” Banerjee said.
The cash conversion cycle is expected to remain at levels similar to FY2025 during FY2026e, keeping borrowings largely range-bound and maintaining coverage indicators at adequate levels. ICRAโs Stable outlook reflects expectations of steady operating income growth, moderate leverage, and comfortable coverage metrics.
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