CRISIL SME TRACKER: Road SME players’ margins may remain stable in FY25 | Economy & Policy News

CRISIL SME TRACKER: Road SME players’ margins may remain stable in FY25 | Economy & Policy News


The overall road sector capital expenditure (capex), comprising National Highways, state roads and rural roads, is expected to grow by 8-13 per cent in financial year 2025 (FY25), driven by higher execution. 

 


The state roads segment account for about 50 per cent of the overall road sector capex. 

 


This share of small and medium-sized enterprise (SME) players in this segment stands at around 60 per cent and this segment contributes around 60-70 per cent of total SME industry revenues in the roads sector. 

 


On the low base of FY21, the state spend on roads grew by 21 per cent in FY22 and is estimated to have grown further by 10-13 per cent in FY23, largely in line with the growth in budgetary outlay. 

 

In FY24, state spends are expected to go up further by 8-12 per cent as their percentage achievement of budgetary allocations are expected to be largely in line with historical average.

CRISIL SME TRACKER: Road SME players’ margins may remain stable in FY25 | Economy & Policy News

 


Consequently, the revenue of the SME players are expected to grow by 5-10 per cent in financial year 2025, driven by higher execution. This would come on the back of 8-12 per cent revenue growth that is likely to have been observed in FY24.




The margins of the road SME players were squeezed by 150-250 basis point (bps) and contracted to 6-8 per cent  in FY23 on account of exorbitantly high commodity prices. As the prices of key commodities cool off, the margins of the players are expected to recover in FY24 and increase by 100-200 bps. The margins are likely to remain stable in FY25 on account of stable commodity prices. 




The liquidity conditions are also expected to improve as the liquidity measures under the Atmanirbhar Bharat scheme have been extended till March 2024, and the payments by state authorities also become more punctual.

First Published: Jun 27 2024 | 1:24 AM IST


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