India’s construction equipment industry is turning more cautious on FY27 after rising steel and bitumen prices and slower execution of infrastructure projects disrupted expectations of a stronger recovery from last year’s slowdown.
The industry had entered the financial year expecting double-digit growth, but is now likely to expand at a more moderate single-digit pace, Shalabh Chaturvedi, Vice President of the Indian Construction Equipment Manufacturers’ Association (ICEMA) and Managing Director, India and SAARC, CASE Construction Equipment, told PTI.
“At the beginning of the financial year, the expectation was for double-digit growth. Considering the developments since then, we are looking at a more moderate, single-digit kind of growth. It is still growing, nonetheless,” Chaturvedi said.
The reassessment follows an already subdued FY26. Construction equipment sales declined about 2% to 136,995 units during the year, according to ICEMA, as domestic sales fell nearly 7%. A 32% increase in exports partly cushioned the slowdown.
In May, ICEMA had projected around 7% growth for FY27, betting on the Centre’s Rs 12.2 lakh crore capital expenditure programme, stronger road activity and spending on infrastructure development, however the sector’s growth was complicated by rising input costs.
Input costs complicate the recovery
The immediate concern is no longer simply whether infrastructure projects are being awarded, but whether contractors can execute older orders profitably after a sharp increase in input costs.
Chaturvedi said bitumen, a petroleum-derived material used extensively in road surfacing, had climbed from roughly Rs 40,000-45,000 per tonne to close to Rs 80,000 per tonne before easing to about Rs 75,000 in July.
Steel costs have also moved higher. ICRA said domestic hot-rolled coil prices had risen about 14% sequentially to Rs 57,700 a tonne by the end of March. The pressure has been large enough for the government to intervene in highway contracts.
In April, the Ministry of Road Transport and Highways introduced a temporary cost-escalation relief mechanism for national highway projects, citing higher fuel, construction-material and logistics costs arising from the global situation.
The government has since changed highway contract rules to account for the sharp rise in construction costs. Compensation for higher steel, bitumen and other input prices is now based on more recent market rates, while eligible contractors can be paid monthly to reduce the strain on their finances.
ICRA had already flagged slower FY27 equipment growth
Independent industry research points in broadly the same direction. In a March note, ICRA projected construction-equipment industry growth of only 3-5% in FY27, after a subdued FY26.
ICRA said demand for construction equipment could remain under pressure because work on road, highway and mining projects has been slower than expected, while delays in awarding new projects have reduced fresh demand.
Equipment has also become more expensive after stricter CEV Stage V emission rules came into force, and higher borrowing costs have made purchases harder to finance.
Its outlook for the broader construction sector is somewhat better. ICRA expects construction companies’ revenues to grow 6-8% in FY27 as firms work through their existing project pipelines and execution improves.
But it warned that the West Asia conflict and higher input costs could still slow that recovery. Overall construction-sector growth is expected to ease to 6.5% in FY27 from 7.4% a year earlier.
Company results suggest the slowdown is uneven rather than broad-based. Action Construction Equipment reported Q1 FY27 revenue growth of about 20%, while Escorts Kubota’s construction-equipment volumes rose 27% and segment revenue 39%.
But Escorts Kubota’s construction-equipment margin still slipped slightly, showing how stronger sales can coexist with rising input costs. The picture, therefore, is one of continued growth, but with pressure varying sharply across product categories and end-markets.
Road contractors provide the other half of the picture
The financial performance of road developers offers another way to test the industry’s concerns.
KNR Constructions reported a 4% year-on-year decline in Q1 FY27 revenue to about Rs 588 crore, while operating profit fell sharply. H.G. Infra Engineering’s revenue declined about 26% to Rs 1,101 crore during the quarter.
The weakness is not universal here either. PNC Infratech reported standalone Q1 revenue of Rs 1,518 crore, up about 34% year-on-year, helped by project execution and fresh orders.
Taken together, the numbers point to a construction cycle that is still expanding, but with considerably greater variation between projects and companies than the headline government capital-expenditure numbers might suggest.
For equipment manufacturers, the remainder of FY27 will therefore depend not only on fresh project awards but on whether already-awarded projects move from order books to construction sites. As per experts interviewed by PTI, commodity prices, contractor liquidity and financing costs will determine how quickly that happens.