The Indian mining and construction equipment (MCE) industry is navigating a period of subdued growth, with the first 11 months of FY2025 witnessing a mere 3% volume growth. This is a stark contrast to the robust 26% growth seen in both FY2024 and FY2023. The slowdown, as per ICRA’s report, is primarily due to reduced domestic project awards and execution momentum, hindered by the general elections code of conduct and extended monsoon-related impediments. The export momentum also tapered off during this period.
While a recovery began in the third quarter of FY2025, the overall industry volumes are expected to remain largely flat, with a modest 2-3% growth for the fiscal year. This muted growth is a significant shift from the previous years’ highs, prompting industry stakeholders to reassess strategies and expectations.
Within the domestic market, earthmoving equipment, the dominant sub-segment, saw a 5% year-on-year (YoY) growth. However, this growth was offset by declines in most other sub-segments. The export scenario presents a mixed picture. Concrete and road equipment showed remarkable growth, with increases of 133% and 122% (YoY) respectively. However, the overall export volume growth moderated to 7% (YoY), following a 49% jump in FY2024.
ICRA anticipates a modest growth of 2-5% for MCE industry volumes in FY2026. This projection is set against a high base, with sales exceeding 1 lakh units for three consecutive years. The report also highlights the impact of tight liquidity with Non-Banking Financial Companies (NBFCs), which could affect disbursement and lower loan-to-value ratios, particularly for first-time buyers.
The MCE sector is heavily dependent on financing, with 85-90% of MCEs sold in India being financed. Price escalations from stricter emission norms and the incorporation of new safety features, which will be fully implemented starting July 2025, pose additional challenges. “Despite potential dampening effects on demand due to price hikes and a constrained financing environment, the industry’s stable outlook is supported by expectations of continued government emphasis on infrastructure development and favourable commodity prices,” ICRA stated.
The report forecasts that the credit metrics of the domestic MCE industry will remain stable in FY2026, with revenue growth of 8-10% YoY. However, profitability margins are expected to contract by 50-100 basis points, driven by higher costs, estimated to increase by 12-15% due to regulatory changes and the staggered passing of these costs to customers.
This news shapes the development in the sector by underscoring the need for adaptability and innovation. Companies must navigate the challenges posed by regulatory changes, financing constraints, and market fluctuations. The industry’s future growth will likely hinge on its ability to balance these challenges with opportunities presented by government infrastructure initiatives and favourable commodity prices. The coming years will be pivotal in determining how the MCE industry evolves in response to these dynamics, potentially sparking a wave of technological advancements and strategic shifts.
