New Delhi [India] March 28 : Indian mining and Construction Equipment (MCE) industry experience muted volume growth of about 3 per cent in first 11 months of FY2025, a notable decline compared to 26 per cent growth in both FY2024 and FY2023.
According to a report by ICRA, the slowdown is because of the reduced domestic project awards and execution momentum in the first half of the fiscal year due to the general elections code of conduct, followed by extended monsoon-related impediments. The export momentum also witnessed a tapering during the same period. While a recovery began in Q3 FY2025, overall industry volumes are expected to remain largely flat, with a modest 2-3 per cent growth in FY2025.
Within the domestic market, earthmoving equipment, the dominant sub-segment, saw a 5 per cent (YoY) growth, contrasting with declines in most other sub-segments in the 11 months of FY2025.
In exports, concrete and road equipment showed remarkable growth, with increases of 133 per cent and 122 per cent (YoY) respectively. However, overall export volume growth moderated to 7 per cent (YoY), following a 49 per cent jump in FY2024.
ICRA anticipates modest growth of 2-5 per cent for MCE industry volumes in FY2026 as well. This projection is set against a high base, with sales exceeding 1 lakh units for three consecutive years.
The report also highlights the impact of tight liquidity with Non-Banking Financial Companies (NBFCs). The MCE sector is heavily dependent on financing, with 85-90 per cent of MCEs sold in India being financed. The industry will also pose a challenge as tight liquidity may affect disbursement and lower loan-to-value ratios particularly for the first-time buyers. Price escalations from stricter emission norms and the incorporation of new safety features, which will be fully implemented starting July 2025 are other challenges before the industry.
ICRA says that despite potential dampening effects on demand due to price hikes and a constrained financing environment, the industry's stable outlook is supported by expectations of continued government emphasis on infrastructure development and favourable commodity prices.
The report forecasts that the credit metrics of the domestic MCE industry will remain stable in FY2026, with revenue growth of 8-10% YoY. However, profitability margins are expected to contract by 50-100 bps, driven by higher costs, estimated to increase by 12-15 per cent due to regulatory changes and the staggered passing of these costs to customers.
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