PEB Revenue Growth Likely At 10-12% As Capex, Infra Spend Increase

Pre-engineered building (PEB) manufacturers are likely to see revenue growth of 10-12 per cent in the current and next fiscal years, boosted by strong industry capital expenditure and increasing government investment in infrastructure development. Despite high demand, the industry's revenue growth is limited by optimal capacity utilisation, resulting in continual capacity development.

CRISIL Ratings has conducted a review of five large PEB firms, which account for more than 80 per cent of the organised market, to identify the drivers driving this revenue surge. PEB constructions, which are preferred for their time and cost efficiency, often need 40-50 per cent less installation time than conventional buildings and provide significant savings due to lower steel and labour requirements. The advantages of modular architecture and great recyclability are driving up demand.

PEB demand is primarily driven by the industrial/manufacturing, infrastructure, and real estate sectors. Anand Kulkarni, Director at CRISIL Ratings, adds, “Industrial capex, which makes up around 50 per cent of PEB demand, is anticipated to remain strong. Additionally, the rising adoption of PEB due to its cost benefits over traditional structures will contribute to this growth. The warehousing and logistics segment, driven by e-commerce expansion, is expected to be a significant growth area.”

Infrastructure capital investment, which accounts for 38-40 per cent of PEB demand, supports this trend. PEB structures are likely to be in high demand due to their use in a variety of sectors, including airports, roadways and railways. Increased government funding for infrastructure projects is expected to support this expansion.

Prateek Kasera, Team Leader at CRISIL Ratings, observes that, “Capacity utilisation in the PEB sector was healthy at over 70 per cent in fiscal 2024. To meet growing demand, PEB players are investing in capacity expansion, with an expected 20 per cent increase by the end of the next fiscal year. This gradual expansion will be funded through accruals, maintaining financial stability.”

The industry is expected to see increased profitability as fixed costs are better absorbed and raw material prices remain stable. The debt-to-Ebitda ratio is likely to remain solid at around one, a modest improvement from 1.2 times previous fiscal year, indicating healthy credit profiles. However, the potential impact on profitability of increased steel prices will need to be continuously watched as the sector progresses.