Revenue of railway sector companies expected to grow at moderate pace of 5% in FY26: ICRA

ANI April 15, 2025 158 views

The Indian railway sector is poised for a steady 5% revenue growth in the upcoming financial year, primarily fueled by strong wagon manufacturing demand. Despite a moderate growth outlook, the sector maintains a healthy operating margin of around 12% supported by stable input prices. Government investments continue to play a crucial role in infrastructure development, with capital outlay increasing significantly over recent years. The sector demonstrates resilience through a robust order book-to-income ratio, suggesting stable revenue visibility for the medium term.

"Revenues of the entities operating in the Indian railway sector are expected to expand at a moderate rate of 5 per cent in FY2026" - ICRA Report
New Delhi, April 15: The revenue of companies operating in the Indian railway sector is expected to grow at a moderate pace of 5 per cent in the financial year 2025-26 (FY26), according to a recent analysis by ratings agency ICRA.

Key Points

1

Wagon manufacturers driving sector growth

2

Railway infrastructure investments remain strong

3

Order book-to-income ratio indicates stability

4

Sector maintains healthy 12% operating margin

The growth will be largely driven by strong demand in the wagon manufacturing segment.

ICRA noted that while wagon manufacturers are expected to witness robust expansion, construction companies involved in railway-related infrastructure projects may see relatively slower growth.

It said "revenues of the entities operating in the Indian railway sector are expected to expand at a moderate rate of 5 per cent in FY2026, primarily driven by robust growth expectations from Wagon manufacturers".

Despite the moderate growth outlook, the sector's profitability is likely to remain strong. The weighted average operating margin is estimated to stay healthy at around 12 per cent in FY26. This will be supported by operating leverage benefits and expectations of stable input prices.

The report highlighted the government's continued focus on boosting the railway sector through increased investment and reforms. Over the past several years, the Government of India has made substantial investments in transport infrastructure to reduce logistics costs, shorten transit times, and enhance overall connectivity.

There has also been a consistent push to improve railway infrastructure, including tracks and safety standards, along with better passenger facilities such as upgraded stations and modern rolling stock.

This commitment is evident in the significant rise in capital outlay for Indian Railways, which has increased by 130 per cent over the past five years, reaching Rs 2.52 lakh crore in the Budget Estimates (BE) for FY26. However, the budgetary support component of this outlay has grown only modestly--by 2 per cent--between FY24 and FY26 BE.

The analysis noted that thanks to sustained investments, companies engaged in Engineering, Procurement and Construction (EPC) and wagon manufacturing have seen a strong buildup in their order books. The order book-to-income ratio for such companies increased from 1.33 times in FY2015 to 2.77 times in FY2024.

This indicates solid revenue visibility for the medium term, giving the sector a stable outlook despite the moderate growth rate projected for FY26.

Reader Comments

R
Rahul K.
Good to see the railways getting consistent investments! The 130% increase in capital outlay over 5 years is impressive. Hope this translates to better services for passengers too 🚆
P
Priya M.
I work in logistics and these infrastructure improvements can't come soon enough. The railway upgrades will make such a difference in reducing transit times and costs. 5% growth seems conservative though - I'd expect more with all these investments.
A
Amit S.
The report mentions stable profitability but I'm concerned about the modest 2% growth in budgetary support. Shouldn't public funding keep pace with the ambitious projects? Otherwise we might see more PPP models coming in.
S
Sunita R.
As someone who travels by train regularly, I'm happy to hear about the focus on passenger facilities. The new Vande Bharat trains are great, but we need more of them and better maintenance of existing coaches too!
V
Vikram J.
The order book growth is really promising for companies in this space. 2.77x ratio shows strong demand. Might be a good sector to watch for investors looking at infrastructure plays.
N
Neha P.
While the numbers look good on paper, I hope there's equal focus on safety standards and timely project completion. We've seen too many railway accidents recently that need addressing.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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Tags:
Indian Railways ICRA Railway Sector Wagon Manufacturing Infrastructure Investment FY26 Revenue
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