An upmarket Swiss watch retailer is suing the state government for $4 million for losses it claims to have suffered from construction of Sydney's delayed $2.1 billion light rail project.

Watches of Switzerland is the latest in a growing list of companies, including Spanish contractor Acciona, pursing the state's lead transport agency over the 12-kilometre light rail line from Circular Quay to Randwick and Kingsford in the city's south east.

Court documents show Watches of Switzerland's profits have more than halved to $1.3 million in the 12 months to June last year, from more than $3 million in the prior period.

The family owned retailer of luxury watches has a large shop on the ground floor of the five-star Four Seasons Hotel on George Street near the Rocks.