ICRA identifies factors causing the mining and construction equipment slump

In FY2025, the mining and construction equipment sector in India grew by just 3 percent YoY, down from 26 percent in FY2025, according to ICRA.

According to the most recent ICRA report, the Indian Mining and Construction Equipment (MCE) industry saw a modest 3 percent YoY increase in volume during the first 11 months of FY2025. This is a significant slowdown from the 26 percent growth rates in both FY2024 and FY2023. The slowdown is due to lower domestic project award activity and execution momentum in the first half of the fiscal year, which was influenced by the general elections, followed by prolonged monsoon-related impediments. During the same period, export momentum slowed. While a recovery began in Q3 FY2025, overall industry volumes are expected to remain mostly flat, with a modest 2-3 percent increase in FY2025.

In contrast to declines in the majority of other sub-segments in 11M FY2025, the dominant sub-segment of the domestic market, earthmoving equipment, saw a 5 percent YoY growth. Concrete and road equipment exports increased by 133 percent and 122 percent year on year, respectively. However, overall export volume growth has moderated to 7 percent year on year, following a 49 percent rise in FY2024.

In FY2026, ICRA expects MCE industry volumes to grow by 2 to 5 percent year on year. This projection is based on a high base, with sales exceeding one lakh units for three years in a row. In contrast to declines in the majority of other sub-segments in 11M FY2025, the dominant sub-segment of the domestic market, earthmoving equipment, saw a 5 percent YoY growth. Concrete and road equipment exports increased by 133 percent and 122 percent year on year, respectively. However, overall export volume growth has moderated to 7 percent year on year, following a 49 percent rise in FY2024.

In FY2026, ICRA expects MCE industry volumes to grow by 2 to 5 percent year on year. This projection is based on a high base, with sales exceeding one lakh units for three years in a row. Despite potential demand dampening effects from price increases and a constrained financing environment, the industry’s stable outlook is supported by expectations of continued government investment in infrastructure and favourable commodity prices. Despite flat volumes, industry performance in FY2025 surpassed initial expectations. Given the industry’s cyclical nature and a high base of over 1 lakh units sold annually over the last three years, FY2026 volumes are expected to grow moderately by 2 to 5 percent. These estimates could be revised upward if domestic project awarding activity recovers on time, project execution speeds up, and exports increase.

ICRA expects the domestic MCE industry’s credit metrics to remain stable in FY2026, with revenue growth of 8 to 10 percent YoY. However, profitability margins are expected to narrow by 50-100 basis points, owing to higher costs (estimated to rise by 12-15 percent) as a result of regulatory changes and the staggered pass-through of these costs to customers. Mid-sized companies with relatively leveraged balance sheets may face some pressure on coverage metrics. The elevated working capital intensity as of March 2025, caused by increased inventory holding during the emission norms transition, is expected to moderate.

For more details, visit: https://www.icra.in/