Mumbai,The Indian aircraft maintenance, repair and overhaul (MRO)industry is expected to see a 50 per cent topline growth to Rs 4,500 crore in FY26 amid fresh demand triggered by airline operators’ expanding fleet size, ratings agency Crisill said on Monday.
The rating agency’s study based on three MRO operators, which account for 90 per cent of the industry’s revenue, also pointed out that reduction in GST on aircraft components and services not only positions domestic MRO players more competitively with their overseas competitors but also ease their working capital blockage.
Indian MRO players typically provide three types of services — line checks (undertaken before every take off), air frame checks (every 12-18 months which involves grounding the aircraft for 3-4 weeks) and redelivery checks (at the time of expiry of lease period of 6-7 years).
“Revenue of the domestic aircraft maintenance, repair and overhaul industry will surpass Rs 4,500 crore in fiscal 2026, clocking an impressive 50 per cent growth over fiscal 2024. The increase in scale will enhance profitability margins which along with range bound debt levels should improve debt protection metrics and strengthen credit profiles,” Crisil Ratings said.
The fleet of domestic operators is expected to grow by 20-25 per cent by next year, the agency said, and this will be aided by new aircrafts getting added and grounded aircrafts (post engine related issues) resuming operations.
Additionally, reduction in Goods and Services Tax (GST) on aircraft components and services not only positions domestic MROs more competitively with their overseas competitors but also ease their working capital blockage.
This along with players’ improving profitability will have MRO players savouring improved credit profile over the medium term, it stated.
“While line and airframe checks are strongly correlated with aircraft fleet size, redelivery checks are likely to grow multi-fold next fiscal (up to 10 times over fiscal 2024 levels). This will be driven by the reduction in GST input tax to 5 per cent on all aircraft components, which may lower the component-related expenditure and place Indian MROs on par with their Asian competitors. Their intrinsic cost advantages will further help Indian MROs gain market share,” said Shounak Chakravarty, Director, Crisil Ratings.
Stating that in fiscal 2024, only around 14 per cent of the total MRO spends by Indian carriers were carried out by Indian MROs, the ratings agency said this is mainly because high-value, heavy maintenance checks, such as engine checks and component overhauls (every 20-24 months), are usually contracted to overseas players due to capacity constraints and higher turnaround times of Indian MROs.
In addition to demand tailwinds, Indian MROs are also adding to their service repertoire which will improve their penetration up to 20 per cent by next fiscal.
The share could have been higher but for the time needed to ramp up hangar capacities, local ecosystem for aviation spare parts and extensive training/upskilling of manpower that will yield results only over the medium term, Crisil Ratings said.
With growing scale of operations and rising share of higher-margin redelivery segment, profitability should also improve to around 20 per cent by fiscal 2026. This along with correction of inverted duty structure (and thereby reducing accumulation of input tax credit) will boost cash flows for the MRO service providers, it said.
“We expect, the working capital cycle to improve by 20-25 days and hence overall debt levels will remain range bound even as MRO players invest in expanding their service offerings. Consequently, interest coverage ratio will improve to 3-3.3 times next fiscal, from 2.7 times in fiscal 2024, thus improving credit profiles,” said Pallavi Singh, Associate Director, Crisil Ratings.
