The Indian Mining and Construction Equipment industry increased only 3 percent YoY in FY2025, down from 26 percent in previous years, owing to election delays, monsoon interruptions, and slower exports, with a slight rebound predicted in FY2026.

According to ICRA’s most recent report, the Indian Mining and Construction Equipment (MCE) market recorded subdued volume growth of 3 percent YoY in 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 constraints. During the same era, export momentum slowed. While a rebound began in Q3 FY2025, overall industry volumes are predicted to stay mostly steady, with a minor 2-3 percent increase in FY2025.

Within the domestic market, earthmoving equipment, the biggest sub-segment, increased by 5 percent year on year, while most other sub-segments declined in the 11th month of FY2025. Exports of concrete and road equipment increased by 133 percent and 122 percent year on year, respectively.  However, overall export volume growth moderated to 7 percent YoY, following a 49 percent jump in FY2024.

ICRA anticipates a further year of modest YoY growth of 2-5 percent for MCE industry volumes in FY2026. This prediction is based on a high base, with sales exceeding 1 lakh units for three consecutive years.

The sector’s dependency on financing, with 85-90 percent of MCEs sold in India funded, demonstrates the impact of limited liquidity with Non-Banking Financial Companies (NBFCs). This circumstance may impact disbursements and lower loan-to-value ratios, especially for first-time purchasers, providing a challenge to the industry in the near term. Price increases due to changes in pollution standards and the installation of new safety measures, which will be fully implemented beginning in July 2025, are likely to exacerbate the situation.

Despite potential demand dampening impacts from price increases and a restrictive financing environment, the industry’s steady outlook is underpinned by forecasts of continuing government investment in infrastructure and favourable commodity prices. Despite stagnant volumes, industry performance in FY2025 surpassed original forecasts. Given the industry’s cyclical nature and a strong base of over 1 lakh units sold yearly over the last three years, FY2026 volumes are expected to expand moderately by 2-5 percent. These predictions could be revised upward if domestic project awarding activity recovers on schedule, project execution speeds up, and exports increase.

ICRA predicts that the credit metrics of the domestic MCE industry will remain stable in FY2026, with revenue growth of 8-10 percent YoY. However, profitability margins are likely to decline by 50-100 basis points, driven by higher costs (forecast 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 leveraged balance sheets may face some pressure on coverage metrics. The elevated working capital intensity in March 2025, due to greater inventory holding during the emission norms changeover, is likely to diminish.

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