Indian Railways Forecasts 5% Revenue Growth In FY’26; Led By Wagon Manufacturers

The Indian railway sector is likely to achieve moderate revenue growth of 5% in FY’26, driven primarily by strong performance from wagon manufacturers.

This comes as a result of sustained government investments in railway infrastructure, although construction entities within the sector may see slower growth.

According to an analysis by credit rating agency ICRA, the weighted average operating margins for the sector will remain healthy at around 12% in FY’26, supported by operating leverage benefits and stable input prices.

Government Investments In Railway Infrastructure

The growth projections align with the Indian government’s continued focus on improving railway infrastructure.

Capital outlay for railway development has increased significantly by 130% over the past five years, reaching ₹2.52 lakh crore in the 2025-26 Budget Estimates.

However, the budgetary support for the railway sector has grown modestly by only 2% between FY2024 and FY2026, signaling a potential slowdown in funding momentum.

Suprio Banerjee, Vice President and Co-Group Head of Corporate Ratings at ICRA, highlighted that the railway sector has been a major beneficiary 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% compounded annual growth rate (CAGR),” Banerjee noted.

However, he cautioned that the revenue growth of ICRA’s sample entities catering to the railway sector is likely to experience relatively flat growth in FY’25 and FY’26.

Wagon Manufacturers Lead Revenue Growth

The order book-to-income ratio for engineering, procurement, and construction (EPC) firms and wagon manufacturers has surged to 2.77 times in FY’24 from 1.33 times in FY’15.

This strong order book ensures robust revenue visibility for these companies, with wagon manufacturers expected to drive the majority of the revenue growth in the sector.

EPC and wagon manufacturing firms are expected to drive revenue growth, while service-oriented segments like ticketing and logistics will bolster the sector’s margins.

These segments play a crucial role in maintaining the railway sector’s profitability.

The moderate revenue growth projected for the Indian railway sector in FY’26 reflects a period of transition.

With strong government support for infrastructure development, the focus is now on ensuring long-term sustainability through strategic investments in key segments such as rolling stock and logistics.

While slower growth in construction entities may pose challenges, the sector remains well-positioned to continue driving India’s broader economic growth.

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