New Delhi, July 14 (KNN) The construction industry is expected to observe a healthy revenue growth in the medium term, said ICRA in a recent report. The construction gross value added (GVA) is likely to grow at 9-11 per cent in FY23, due to the government’s emphasis on infrastructure development, a robust order book, and a low base effect. 

While roads and buildings have continued to account for a major bulk of the order book, the metro/urban infrastructure, water and sanitation have shown a significant boost in the recent years. 

“The aggregate order book-to-sales ratio of ICRA’s sample of 12 entities stands at around 3.2 times, thereby indicating a strong revenue growth prospect over medium term,” the credit rating agency said.

The report also pointed out that a sharp increase in commodity prices along with increased competition, will have a negative impact on industry profitability, with expects a decline in operating profitability by 100-200 basis points in the current fiscal.

Abhishek Gupta, Sector Head & Assistant Vice President, Corporate Ratings, ICRA , said, “Over the last five years, the order book of sample construction companies has increased at a CAGR of 12 per cent remaining between 3 times and 4 times of billing, supported by increased capital outlay towards the infrastructure sector by the Central and state governments.”  

“Growth was much higher for some mid-sized entities, which scaled up significantly during this period as the relaxations in bidding criteria during Covid increased their ability to bag orders. Some larger companies were also able to expand their order book at a robust pace during this period,” he added.

Supported by a strong order book pipeline, industry’s revenue is predicted to grow by 12-14 per cent during FY23.

Going forward an order inflows in the roadways, railways, and drinking water sectors are likely to be healthy, supported by increasing allocations from the government.  (KNN Bureau)