Railway Sector to Witness Moderate 5% Revenue Growth in FY26: ICRA

The Indian railway sector is projected to register a moderate revenue growth of 5% in FY2026, primarily led by strong performance from wagon manufacturers, according to an analysis by credit rating agency ICRA. However, construction-oriented entities may face slower growth during the same period.

The report highlights that the sector's weighted average operating margins are expected to remain robust at approximately 12% in FY26, supported by benefits from operating leverage and relatively stable input costs.

This outlook comes in the backdrop of continued government investment in railway infrastructure. Over the past five years, the capital outlay has increased significantly—by nearly 130%—reaching ₹2.52 lakh crore in the Budget Estimates for FY2025-26. Despite this surge, ICRA noted that the budgetary support has shown only a modest 2% growth between FY2024 and FY2026, potentially indicating a slowdown in funding momentum.

Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings, at Icra, noted that railway sector entities have been key beneficiaries of the government's push to improve connectivity and reduce logistics costs. Over the last three years, companies involved in rolling stock, wagon manufacturing, track infrastructure, and electrification have seen a robust 24 per cent compounded annual growth rate (CAGR).

However, Banerjee also cautioned that "the revenue growth of ICRA's sample entities catering to the Railway sector is likely to witness relatively flattish growth in FY2025 and FY2026 estimates. In the near to medium term, the growth momentum is likely to taper down in line with a relatively broader trend in budgetary outlay towards the Railway Sector."

The report further notes that the order book-to-income ratio for engineering, procurement, and construction (EPC) firms and wagon manufacturers rose sharply to 2.77 times in FY2024, compared to 1.33 times in FY2015, which ensures healthy revenue visibility in the near term.

While EPC firms and wagon manufacturers are expected to remain the main revenue drivers, ICRA added that margins are likely to be further supported by service-oriented segments such as ticketing and logistics.