Railway sector to see 5% revenue growth this fiscal: ICRA

Bengaluru: India’s railway sector is projected to see 5 per cent revenue growth for the Indian railway sector in the ongoing financial year 2025-26 (FY26), according to credit ratings agency ICRA on Monday.

This growth will be primarily driven by strong demand for wagon manufacturers given the bulky nature of the products they undertake, while construction-focused segments are expected to witness moderate expansion. EPC (engineering, procurement, and construction) contractors face intensifying competition despite healthy order books.

And yet, it is the service providers in ticketing and logistics that mainly support the sector’s profitability.

“While competition in the railway segment has increased substantially in recent years, especially in the EPC segment, the credit profiles of entities catering to the Indian railway sector will continue to benefit from the operating leverage and the comfortable receivable cycle,” said Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd.

The sector's operating margins are likely to remain healthy at approximately 12 per cent, due to cost controls and operating leverage.

Segments catering to the requirement of rolling stock/wagons, track infrastructure, electrification and safety components have witnessed a compound annual growth rate (CAGR) of 24 per cent between FY22 and FY24.  However, their revenue growth is likely to witness relatively flattish growth in FY25 and FY26. In the near to medium term, the growth momentum is likely to taper down, said Banerjee.

Government investments in transport infrastructure have also been critical, noted ICRA. Though the capital outlay for the Indian railways has increased by 130 per cent over the previous five years, recent growth is slowing. The budgetary support has grown by modest 2 per cent between FY24 and FY26 BE (budget estimates).