Indian Mining and Construction Equipment industryfaces modest growth amidst financial constraints, price pressures: ICRA.

The Indian Mining and Construction Equipment(MCE) industry experienced muted volume growth of 3.0 per cent Y-o-Y in 11months of FY2025. This is a notable deceleration compared to the 26 per centgrowth rates in both FY2024 and FY2023, notes a recent report by ICRA.

The slowdown is attributed to reduced domesticproject award activity and execution momentum in the first half of the fiscalyear, influenced by the General Elections, followed by extended monsoon-relatedimpediments. The export momentum also witnessed a tapering during the sameperiod. While a recovery began in Q3 FY2025, overall industry volumes areexpected to remain largely flat, with a modest 2-3 per cent growth inFY2025.   

Within the domestic market, earthmovingequipment, the dominant sub-segment, saw a 5.0 per cent Y-o-Y growth,contrasting with declines in most other sub-segments in 11M FY2025. Inexports, concrete and road equipment showed remarkable growth, with increasesof 133 per cent and 122 per cent Y-o-Y, respectively. However, overall exportvolume growth moderated to 7.0 per cent Y-o-Y, following a 49 per cent jump inFY2024.

ICRA anticipates a further year of modest Y-o-Ygrowth of 2.0-5.0 per cent for MCE industry volumes in FY2026. This projectionis set against a high base, with sales exceeding 1.0 lakh units for threeconsecutive years.

The sector’s reliance on financing, with 85-90per cent of MCEs sold in India being financed, highlights the impact of tightliquidity with Non-Banking Financial Companies (NBFCs). This situation mayaffect disbursements and lower loan-to-value ratios, particularly forfirst-time buyers, posing a challenge for the industry in the near term.

The challenge is likely to be exacerbated byprice escalations resulting from emission norm changes and the incorporation ofnew safety features, which will be fully implemented starting July 2025.

Despite potential dampening effects on demanddue to price hikes and a constrained financing environment, the industry’s stableoutlook is supported by expectations of continued government emphasis oninfrastructure development and favourable commodity prices. Industryperformance in FY2025 surpassed initial expectations, even with flat volumes.

Given the industry’s cyclical nature and a highbase, with over 1.0 lakh units sold annually for the past three years, FY2026volumes are projected to grow moderately by 2.0-5.0 per cent. There ispotential for upside in these estimates, contingent on a timely recovery indomestic project awarding activity, accelerated project execution, and a surgein exports.

ICRA forecasts that the credit metrics of thedomestic MCE industry will remain stable in FY2026, with revenue growth of 8-10per cent Y-o-Y. However, profitability margins are expected to contract by50-100 bps, driven by higher costs (estimated to increase by 12-15 per cent)due to regulatory changes and the staggered pass-through of these costs tocustomers.