MUMBAI: Large, diversified engineering, procurement and construction (EPC) companies are likely to see 9-11% revenue growth this fiscal, driven by steady growth in infrastructure capital capex, healthy order books and faster execution of projects, with a favourable shift in the order mix, says a report.
Infrastructure capex alone accounts for 75% of the country’s total capex.
According to a Crisil analysis of the 15 top EPC companies, accounting for Rs 3.15 trillion in annual revenue last fiscal, after clocking a compound annual growth of 20% over fiscals 2022-24, revenue growth normalised last fiscal to 8.3% on a high base, in line with the 6% growth in domestic infrastructure capex.
According to Gautam Shahi, a director with Crisil Ratings, this fiscal, total domestic infrastructure capital outlay is expected to grow 7-9%, driven by steady budgetary allocation by the Centre and the states and a moderate increase in private sector participation.
The share of private investments is expected to rise to 11%, up from 9% in the previous fiscal, driven by government efforts to revitalise the build-operate-transfer model in the roads sector and increasing private investments in the renewable energy sector, he added.
The order book position of EPC companies remains healthy, with order book to revenue ratio at 3.7 times as of March 2025, higher than the 3.5 times in the previous fiscal. There has been a shift in the composition of the order book, with the share of overseas orders rising to 27% as of March 2025 from 23% a year ago. In fact, the share used to be much lower at 16% five years ago.
From a sectoral perspective, the share of power projects, primarily transmission & distribution, in the overall order book has risen to 20% as of March 2025 from 13% a year ago and is expected to support operating profitability due to higher margins (early double-digits), compared with roads and railways (high single-digits). The latter's share has decreased to 30% as of March 2025 from 33% a year ago, while the share of water projects remains stable at 27%.
Overall, the revised order book composition, completion of most of the legacy orders, stable commodity prices and rupee depreciation will support the profitability of players despite intense competition. Operating margin is expected to continue its upward trend, rising 50 bps to reach 9.5% this fiscal.