Indian mining and construction equipment industry reports 5% YoY growth in volumes in Q1FY25: ICRA

06 Aug 2024 Evaluate

Credit rating agency ICRA in its latest report has said that the Indian mining and construction equipment (MCE) industry has reported a 5% YoY growth in volumes in Q1 FY25 as per the initial data released by the Indian Construction Equipment Manufacturers Association (ICEMA). While this growth has been modest, compared to the 20% YoY expansion seen in Q1 FY24, the industry was, in fact, bracing for a contraction in domestic demand in H1 FY25. This expectation was in line with the previous election cycles, driven by a slowdown in the new project award activity (due to the Model Code of Conduct in place on account of the Parliamentary Elections in April-June 2024) and the monsoon-related impact on construction activities in Q2 FY25. Nonetheless, the performance in Q1 reflects customer optimism over the government’s sustained focus on infrastructure development and the consequent impact on MCE demand.

According to the report, in Q1 FY25, the growth in domestic sales (+5% YoY) was driven by the earthmoving and concreting equipment segments, which saw 5% and 8% YoY growth, respectively. The road (+1% YoY), material handling (+1% YoY), and material processing equipment (-2% YoY) segments reported flattish volumes. Road construction drives 35-45% of MCE sales in India followed by mining (20-30% share), real estate (10-20%), and others. The trends seem to have been mixed across the sectors in Q1 FY25. The execution data from MoRTH reflects a decline in road execution by 14% YoY in Q1 FY25. In contrast, mining of coal (+8% YoY production as per Coal India), iron ore (+4% YoY in Apr-May), and limestone (+2.6% YoY in Apr-May) reported continued traction, indicating strong demand momentum in the user industries like energy, steel, and cement. Healthy residential real estate demand supported concreting equipment volumes while YoY growth seen in port cargo traffic and rail freight is likely to have aided the demand for material handling equipment.

The report said going forward, the pace of awarding activity in the road sector has remained muted over the last 15 months due to the pending Cabinet approval for the revised cost pertaining to the Bharatmala PariyojnaI plans; receipt of the same will be crucial for pushing up the pace of awards in the current fiscal. In other segments - healthy outlay in Budget FY24-25 for the Jal Jeevan Mission, the PM Gram Sadak Yojana, and the PM Aawas Yojana - schemes which have been among the major drivers for new equipment demand - is a positive. While a pick-up in state government capex could yield a faster turnaround in construction activity/MCE volumes, given the severity of the monsoons in several states so far, the same will be more ascertainable only after a few months.

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