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Domestic mining and construction equipment volumes may dip in FY25: ICRA

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Business 18 Apr 2024 04:10 PM IST Business Standard

Domestic mining and construction equipment (MCE) industry volumes may fall in the current fiscal year, according to rating agency ICRA, due to a slowdown in new project orders ahead of the Lok Sabha elections and a monsoon-related impact on construction activity.

"ICRA expects FY2025 to see a 12-15% y-o-y decline (which translates into volumes of 114,000-118,000 units)," the rating agency said in a statement.

This decline comes after two years of robust growth (26% in FY23 and 24% in FY24). The reversal in this growth trend will be caused by a slowdown in new project award activity in Q4 FY2024 and Q1 FY2025, as the Model Code of Conduct will be in effect during the Parliamentary Elections in April-May 2024.

"Additionally, the aggregate revenues for ICRA's sample set companies are expected to contract by 9-12% 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 the 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.