The capital goods sector is growing rapidly thanks to rising government spending

Bombay: Buoyed by continued strong government spending on rail (including metros), defense and renewables, capital goods makers are likely to see revenue growth of 9-11 percent in fiscal 2025, Monday’s report showed.

Operating margin may shrink by 80-100 basis points to 12-13 per cent in FY25 as the market scenario continues to be highly competitive and higher margin exports remain sluggish even as raw material prices (mainly steel, copper and aluminum ) are stable, according to the CRISIL Ratings report.

That said, modest capital expenditure (capex) and continued lower dependence on debt will support credit profiles, he added. “Continued private sector capital expenditure in conventional sectors (6-8%, year-on-year growth), supported by an increase in the number of renewable capacity launches (up 25-30% y/y), bodes well for the capital prospects of commodity companies.” – said Aditya Jhaver, director of Crisi1 Ratings.