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Companies operating in the Indian railway sector are expected to grow their revenue at a moderate rate of 5 percent in the financial year 2025-26 (FY26), according to a recent analysis by rating agency ICRA. The report attributes this growth mainly to strong demand in the wagon manufacturing segment. While wagon manufacturers will likely drive expansion, construction firms involved in railway infrastructure projects may register slower growth. ICRA stated, “Revenues of the entities operating in the Indian railway sector are expected to expand at a moderate rate of 5 percent in FY2026, primarily driven by robust growth expectations from wagon manufacturers.”
Wagon Demand To Lead Sector Growth In Indian Railway
ICRA observed that wagon manufacturers will continue to benefit from strong demand, helping lift overall revenue in the railway sector. In contrast, construction companies working on railway-related infrastructure may experience more modest growth. This performance divergence reflects the higher momentum in rolling stock production compared to infrastructure execution timelines.
Railway Sector’s Profitability To Stay Strong In FY26
Despite the moderate revenue growth outlook, the sector’s profitability is likely to remain stable. ICRA estimates the weighted average operating margin at around 12 percent in FY26. Companies will maintain this margin due to operating leverage benefits and expectations of stable input prices, supporting earnings across the sector.
Government Focus Sustains Sector Investment
The report highlights the government’s sustained focus on the railway sector, which continues to attract strong public investment. Over recent years, the Government of India has boosted transport infrastructure funding to reduce logistics costs, improve connectivity, and shorten transit durations. Authorities have also invested in safety upgrades, track improvements, modern rolling stock, and better passenger amenities.
Capital Outlay Shows Significant Growth
ICRA reported that capital outlay for Indian Railways 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 portion of this outlay grew only modestly—by 2 per cent—between FY24 and FY26 BE.
Order Book Build-Up Indicates Stability
Thanks to continuous investment, companies engaged in Engineering, Procurement and Construction (EPC) and wagon manufacturing have significantly grown their order books. ICRA noted that the order book-to-income ratio for such companies rose from 1.33 times in FY2015 to 2.77 times in FY2024. This increase indicates strong revenue visibility for the medium term and contributes to the sector’s stable outlook.
(With Inputs From ANI)
