CRISIL: Power Sector Investments to Drive 100–200 bps Revenue Growth for Large EPC Companies to 9–10%

Large engineering, procurement and construction (EPC) companies are expected to see revenue growth accelerate by 100–200 basis points (bps) to 9–10% this fiscal, driven by rising power-sector investments, steady public infrastructure spending and expanding overseas opportunities, according to CRISIL Ratings.

The outlook is supported by healthy order books, with power emerging as the key growth driver for large EPC players. While profitability is expected to come under moderate pressure from commodity inflation and supply-chain disruptions linked to geopolitical developments, low leverage and comfortable debt protection metrics are expected to keep credit profiles stable.

An analysis of 14 large EPC companies, with combined revenue exceeding ₹3.8 lakh crore in the previous fiscal, indicates a stronger growth outlook for the sector.

Power Sector to Lead EPC Growth

Power-sector investments, which account for nearly a quarter of EPC order books, are expected to increase by 15–20% this fiscal. Investments in renewable energy are expected to remain strong, while thermal power spending is also gaining momentum to meet rising baseload electricity demand.

Higher investments in transmission infrastructure to address connectivity constraints are expected to provide an additional boost to EPC order inflows.

According to Gautam Shahi, Senior Director, CRISIL Ratings, the order book-to-revenue ratio of large EPC companies is expected to improve to around 4.0 times this fiscal from approximately 3.5 times last fiscal.

The improvement is expected to provide stronger execution visibility and support a sustained growth pipeline, supplemented by opportunities in overseas markets.

Infrastructure and Overseas Markets Support Growth

Government infrastructure spending is expected to grow 6–8% this fiscal, broadly in line with the previous year, and is likely to remain the largest contributor to EPC revenues.

Within the infrastructure segment, approval timelines and payment cycles for water projects under the Jal Jeevan Mission will remain key monitorables, amid continued delays.

Overseas markets are expected to provide another major growth avenue. The Middle East accounts for around 70–75% of overseas order books for Indian EPC companies and continues to offer opportunities across energy-transition and hydrocarbon projects.

The share of overseas orders in total order books increased to around 33% as of March 2026, compared with approximately 28% a year earlier.

Execution activity in the Middle East was temporarily impacted during the initial phase of the West Asia conflict but has largely normalised across key markets. Reconstruction-related projects could provide additional opportunities for Indian EPC contractors.

Supply-Chain Disruptions to Pressure Margins

Despite the positive revenue outlook, EPC companies are expected to face cost pressures from higher prices of key commodities, including cement, steel and bitumen, along with elevated freight and insurance costs.

While index-linked price-escalation clauses provide some protection against rising input costs, cost pass-through remains partial across a significant portion of projects.

As a result, operating margins are expected to decline by 50–70 bps to 8.2–8.4% this fiscal.

The recent depreciation of the Indian rupee could partly offset margin pressures for EPC companies with significant overseas operations.

Credit Profiles Expected to Remain Stable

Despite the anticipated margin compression, CRISIL Ratings expects the credit profiles of large EPC companies to remain stable, supported by higher execution, adequate cash generation and prudent balance-sheet management.

Ankush Tyagi, Director, CRISIL Ratings, said interest coverage is expected to remain at 3.5–4.0 times this fiscal, compared with 3.8 times last fiscal. Total outside liabilities to tangible net worth is expected to remain broadly stable at 1.6–1.7 times.

Working capital management will remain a key monitorable, particularly collections from projects where receivable pressures have remained elevated over the past few fiscals.