India Construction Market Report Overview
The India construction market size was valued at $701.7 billion in 2022
and is expected to achieve an AAGR of more than 6% from 2024 to 2027, supported by
investment in the construction of transport, electricity and housing projects.
The India construction market research report provides a detailed
analysis of the construction industry?s growth prospects in India by market, project
type, and construction activity. The report also delivers critical insight into the impact
of industry trends and issues, as well as an analysis of key risks and opportunities in
the India construction industry. Moreover, it also provides an analysis of the
mega-project pipeline, focusing on development stages and participants, in addition to
listings of major projects in the pipeline.
India Construction Market Segmentation by Sectors
The key sectors in the India construction market are commercial
construction, industrial construction, infrastructure construction, energy and utilities
construction, institutional construction, and residential construction. The residential
construction sector was the largest in India?s construction market in 2022, followed
by energy and utilities construction, infrastructure construction, and others.
Residential construction: The project types in this sector include
single- and multi-family housing. Forecast-period growth in the residential construction
sector?s output will be supported by the continuation of the Pradhan Mantri Awas
Yojana-Urban (PMAY-U) "Housing for All" Mission to 31st December 2024.
Energy and utilities construction: The project types in this sector
include electricity and power, oil and gas, telecommunications, sewage infrastructure, and
water infrastructure. The sector?s growth over the forecast period will be supported
by the government?s aim to increase renewable energy capacity from 145.2GW in
2021 to 500GW by 2030 and reduce carbon emissions to less than 50% by
2030 and net zero by the end of 2070.
Infrastructure construction: The project types in this sector include
rail infrastructure, road infrastructure, and other infrastructure projects.
Forecast-period growth in the segment will be supported by the government?s focus on
completing major infrastructure projects before the 2024 elections.
Industrial construction: The project types in this sector include
chemical and pharmaceutical plants, manufacturing plants, metal and material production
and processing plants, and waste processing plants. Forecast-period growth in the
industrial construction sector?s output will be supported by a rebound in
manufacturing and export activity, coupled with the government?s aim of attracting
FDI of INR8.2 trillion ($100 billion) in the manufacturing sector by 2028.
Commercial construction: The project types in this sector include
leisure and hospitality buildings, office buildings, outdoor leisure facilities, retail
buildings, and other commercial construction. Forecast-period growth in the commercial
construction sector?s output will be supported by the construction of office and data
center projects, coupled with the expansion of tourism and travel business activities.
Institutional construction: The project types in this sector include
educational buildings, healthcare buildings, institutional buildings, research facilities,
and religious buildings. Forecast-period growth in the institutional construction
sector?s output will be supported by investment in health, education, and research
projects.
Construction and Engineering Industry outlook
Preparation is key for the year ahead
2022 got off to a strong start for the engineering and construction
(E&C) industry but was met with several strong headwinds, including rising costs and
labor shortages. How can businesses navigate continuing volatility to thrive in a
competitive market? Our 2023 outlook explores five engineering and construction industry
trends that can help companies differentiate themselves and capture growth in the year
ahead.
Driving growth as challenges and competition increase
The US engineering and construction industry began 2022 on a bright
note after achieving strong growth of 8% in construction spending in 2021.1 But a closer
look at current market dynamics suggests that 2023 will likely experience differentiated
growth rates across different industry segments.
On the one hand, the nonresidential segment is likely to be buoyed by
funds entering the market from the Infrastructure Investment and Jobs Act and the CHIPS
and Science Act of 2022. On the other hand, residential construction companies are
relatively more pessimistic about the industry outlook for the next year compared to other
segments. So, while some segments may be more bullish than others, there are headwinds
from inflation to supply chain issues which may continue to affect the industry overall in
the coming year. Our 2023 outlook explores five key trends to watch closely.
Five and construction and engineering industry trends to
watch
Market dynamics
Industry segments experience different growth trajectories and
increased competition
2023 could be a different year for the industry, with heightened
uncertainty due to high inflation, rising interest rates, and bifurcation across various
industry segments. Companies are keeping an eye on how their backlogs will play out in
2023, especially during the second half of the year. While many companies have substantial
backlogs (specifically in energy-related construction and data centers), as they get
through the back half of 2023, they may see the impact of a potential economic slowdown on
their deliveries.
Supply chain
Increased lead times and volatile material costs pressure margins
Over the last two years, the COVID-19 pandemic, transport bottlenecks,
and geopolitical uncertainties have exposed vulnerabilities in the E&C supply chain.
These ongoing disruptions are expected to drive the E&C industry toward new business
models, supported by new ecosystems that bring innovative products and services to serve
the unique needs of different end markets.
Future of work
Talent pressures and shifting talent models force industry to rethink
workforce strategies
The E&C industry remains significantly short of skilled workers,
further exacerbated by a tight labor market. Even though the construction industry has a
strong pipeline of projects and spending, especially the infrastructure buildouts,
it?s challenged to meet the demand due to a persistent shortage of workers and high
turnover. With rising inflation and a tight labor market, companies may have to raise
wages and expand benefits to attract and retain employees in 2023.
Emerging technologies
Developers and contractors further invest in emerging technologies to
drive efficiencies While the E&C sector has been historically slow to integrate
and adopt digital technologies, industry players are now increasingly paying attention to
and leveraging emerging technologies. Most E&C companies are utilizing digital
technologies to expand business opportunities and boost profits by reducing costs in the
long run and enhancing project execution. Further, with increased global supply chain
disruptions, increased competition, worker shortages, and skyrocketing material prices,
the need for digital transformation in construction has become much stronger.
ESG and sustainability
Industry evaluates new practices to deliver positive societal impacts
Many customers are becoming more sustainability conscious and placing greater pressure on
developers to lower the carbon footprint of new construction. The increasing global focus
on climate change could incentivize construction companies to factor sustainability into
their projects, construction processes, and designs.
Outlook in India and road ahead
Indias construction industry is expected to grow at an annual average
of 6.6% between 2019 and 2028. The share of the urban population is expected to be 50% of
the total population by 2050. Present levels of urban infrastructure are inadequate to
meet the demands of the existing urban population.
Consequently, the construction industry needs to always change and
evolve. Every year new trends appear within the industry, from technological advancements
to a stronger focus on sustainability. If you run a construction company and you want to
make sure you stay ahead of the game, it can be useful to be aware of emerging trends that
could prepare you for the future.
Technological trends are shaping the future of construction. Every
construction company today is convinced that technology is poised to impact the
construction industry like never before. From cloud-based collaboration to robots and
artificial intelligence an incredible array of developments are helping or poised to help
and improve the way buildings and infrastructure development happens in India.
Also, the construction industry in India suffers from major time and
cost overruns. Data from government and industry reports suggest that projects suffer from
20 to 25 percent time and cost overruns. Waste of resources has been identified as a major
source of inefficiency. Despite a substantial increase in the past few years, demand for
professionals and contractors still exceeds supply by a large margin. The traditional
methods adopted in the Indian construction industry may not suffice the needs of this
dynamic environment, as they have produced large inefficiencies. Innovative ways of
procurement and project management can satisfy the needs aspired to as well as bring added
value.
Facts indicate that by 2025 the country?s construction sector will
be the third-largest in the world, behind China and America, with an overall value of $1
trillion, with construction output expected to grow on average by 7.1% each year. In this
year?s budget, the government increased its expenditure towards infrastructure
development by 20.9% from Rs 4.9 trillion (US$75.9 billion) in its financial year.
Expected to account for 30.1% of the industry?s total value in
2023, it is thought that residential construction will remain the largest market over the
forecast period. It is also predicted that greater demand for residential construction
will be created over the forecast period, due to the country?s rising population,
urbanization, and positive developments in regional economic conditions.
The construction industry locally is fast embracing a centrally managed
construction process bringing design, manufacturing, material sourcing, and construction
together into one streamlined system thus making it possible to build high-quality,
amazing building structures on time and more cost-efficiently. The next few years are
going to be the moment of reckoning for the construction industry to demonstrate its
managerial, financial, and technical prowess to establish new benchmarks in construction
management, construction quality, and imparting value addition to its products and
services.
Company?s Operational & Financial Overview
RKEC Projects? core business is designing and undertaking
construction projects such as Bridges, Ports,
Dams, high-rise structures, Airports, cross water, roads, Highways, Oil
and Gas Pipelines, complexes and environmental structures across India.
On Standalone basis Revenue for financial year 2023 stood at Rs. 299.97
Crores, EBITDA of Rs 32.95 crore . PAT of the Company is Rs 12.30 crores. The Company was
able to achieve such profitability by better execution of projects and focus on
operational efficiencies.
The Company has been able to maintain an efficient capital structure
and has a healthy interest coverage ratio. The Company?s net worth as on 31st March
2023 on standalone basis is Rs303.68 crores .
During the year under review, the Company was awarded 1 project worth
Rs 266.68 crore. It is currently working on total 8 projects amounting to Rs. 1578 crore.
The un-executed order book as on 31 Mar 2023 stands at Rs 1070.38 crore.
With the unexecuted order-book of Rs 1070.38 crore, the Company has a
strong revenue visibility for the coming years. Moreover, the Company has been exploring
bids for projects and expected to add good amount of fresh orders going ahead. This makes
the Company well placed to better execute its projects and further look for opportunities
in this space leading to increase in profitability.
The Company has attained good reputation among our clients because of
track record, experienced members and a proven strength on delivery norms across its all
spectrum of services. RKEC Projects has marked its presence into states like Andhra
Pradesh, Tamil Nadu, Gujarat, Odisha, Rajasthan, Maharashtra,
Kerala, Karnataka, West Bengal and Manipur. The Company has successful
completion of 104 projects in total till now.
Key Competitive Advantage
RKEC has an experience of more than 3 decades in the industry and has
emerged one of leading construction company engaged in the construction of Bridges, Ports,
Dams, high-rise structures, Airports, cross water, roads, Highways, Oil and Gas Pipelines,
complexes and environmental structures across India. Our strong execution, timely
completion capabilities and long-term relations with the stakeholders have been the main
growth riders. We have proven track record of completing all projects within in timeline
along with strong financial track record; healthy relationships with leading
banks/financial institutions . We posses integrated and efficient project execution
skills, supported by a comprehensive equipment pool
Opportunities
There is a huge scope with increasing Government focus on increasing
reforms in the infrastructural and industrial sector. The industry is at the verge of
expansion of key industry sector like power, steel, petrochemicals, telecom and others.
The Country being on faster pace of development, Infrastructural development is the core
area of development in the Country.
Risk Mitigation Strategy
Competition risks - Competing with several other companies for the
acquisition of concessions for projects.
Mitigation: The Company is continuously focusing on building
competitive advantage in its core business areas to ensure that it is competitively well
positioned. The Company?s rich experience in the infrastructure sector, continuous
operational improvements, process excellence, financial discipline and timely completion
of projects has strengthened the Company?s overall competitive position in the
sector.
Project Completion risk - On-time completion of the project is very
necessary for maintaining the reputation and financial viability.
Mitigation: On time completion of the projects is the top priority
of the company. Proper steps are undertaken at each stage of the projects to meet the
completion deadlines.
Capital-intensive business risk - The infrastructure sector depends
heavily on capital investment.
Mitigation: We enjoy good credit ratings in the Industry, which
helps us in obtaining better terms on various loans for financing our construction
equipment, term debt for projects and working capital facilities. We also endeavor to keep
our debt-equity ratio low by utilizing our internal accruals in an efficient manner which
has enabled us to maintain better profitability from project.
Input cost risk Acquisition of the right material with the required
quantity at the project site is very important for the timely completion of the projects.
Mitigation: Raw materials are purchased directly for the company
nominated vendors which have been tested over time which leads the right quality, price,
and on-time supply.
Geographical Risk: The Company is operating in multiple states and
is exposed to risks on account of different site conditions, labour requirement and
related regulatory compliances.
Mitigation:The Company has in place mitigation strategies to
perform detailed risk assessment of each site, robust manpower planning, site mobilization
and de-mobilisation standard operating procedures and compliance checklist to mitigate
such risks.
Internal Control System and their Adequacy
The Company has adequate system of internal control commensurate with
its size and operations to ensure orderly and efficient conduct of the business. These
controls ensure safeguard of assets, reduction and detection of frauds and error, adequacy
and completeness of the accounting record and timely preparation of reliable financial
information.
Material Developments in Human Resources/Industrial Relations Front,
including the Number of People Employed
During the year under review, no such initiatives and/or developments
in Human Resources/Industrial Relations front has been taken by the Company.
Cautionary Statement
Statement in this Management Discussion and Analysis describing the
Company?s objectives, projections, estimated and expectations are "forward
looking statements". Actual results might differ, materially from those anticipated
because of changing ground realities. Forward-looking statements are based on certain
assumptions and expectations of future events. The achievement of such results is subject
to risks, uncertainties and even less than assumptions. Market data and information
gathered from various published and unpublished reports and sources, their accuracy,
reliability and completeness cannot be assured. We do not undertake to make any
announcement in case any of economic scenarios, industry developments and the
forward-looking statements become materially incorrect in future or update any development
and forward-looking statements made from time to time by or on behalf of the Company.
+91-9892691696
