Volumes of domestic mining, construction equipment industry may drop in FY'25: Icra

Volumes of domestic mining, construction equipment industry may drop in FY'25: Icra

Rating agency ICRA on Thursday said the volumes of domestic mining and the construction equipment (MCE) industry may drop in the current financial year on account of a slowdown in the new project orders amidst Lok Sabha elections and monsoon-related impact on construction activities.

"ICRA expects FY2025 to see a 12-15 per cent year-on-year decline (which translates into volumes of 1.14-1.18 lakh units)," the rating agency said in a statement.

This drop is following two consecutive years of strong growth of 26 per cent in FY'23 and 24 per cent in FY'24.

"The reversal in this growth trend will be driven by a slowdown in the new project award activity in Q4 FY2024 and Q1 FY2025, as the Model Code of Conduct will remain in force during the Parliamentary Elections in April-May 2024 (till the announcement of results on June 4, 2024).

"Additionally, the aggregate revenues for ICRA's sample set companies are expected to contract by 9-12 per cent and operating margins by 100-150 basis points in FY2025," the statement said.

The re-election push by the government on project execution led to a strong demand momentum for the domestic mining and construction industry in the last two years.

However, with a likely disruption in project award activity for two consecutive quarters -- in the fourth quarter of FY'24 and first quarter of FY'25, amidst the Lok Sabha elections and monsoon-related impact on construction activities in the second quarter, the first half of FY'25 is likely to see a moderation in sales, Ritu Goswami, Sector Head, Corporate Ratings, ICRA said.