Power Sector to Drive 9-10 Percent Revenue Growth for Large EPC Companies: Crisil

Large, diversified engineering, procurement and construction (EPC) companies are expected to see revenue growth accelerate by 100-200 basis points to 9-10 percent this fiscal, driven by higher investments in the power sector, steady public infrastructure spending and growing overseas opportunities, according to Crisil Ratings.

Crisil Ratings’ analysis of 14 large EPC companies, with combined revenue of more than INR  3.8 lakh crore in the last fiscal, indicates that strong order books will support growth despite pressures from commodity inflation and supply chain disruptions linked to geopolitical developments.

The power sector is emerging as the key growth driver for EPC companies, with investments expected to rise 15-20 percent this fiscal. Power projects account for nearly a quarter of EPC order books, while spending on renewable energy is expected to remain strong and thermal power investments are showing signs of revival amid rising baseload demand.

Higher investments in transmission infrastructure to address connectivity bottlenecks are also expected to support order inflows. As a result, the order book to revenue ratio of large EPC companies is projected to improve to around 4 times this fiscal from about 3.5 times last fiscal, strengthening revenue visibility.

Government infrastructure spending is expected to grow 6-8 percent and remain the largest contributor to EPC revenues. However, approval timelines and payment cycles for water projects under the Jal Jeevan Mission will remain a key monitorable, given delays in the segment.

Overseas markets are expected to provide another growth avenue for Indian EPC companies. The Middle East accounts for around 70-75 percent of their overseas order books and continues to offer opportunities across energy transition and hydrocarbon projects. The share of overseas orders in total order books increased to around 33 percent as of March 2026 from around 28 percent a year earlier.

Crisil said execution activity in the Middle East, which was affected during the initial phase of the West Asia conflict, has largely normalised across key markets. Reconstruction opportunities following the conflict could also support further expansion in the region.

However, geopolitical developments are expected to increase costs, with prices of cement, steel and bitumen, along with freight and insurance expenses, remaining elevated. Although index linked price escalation clauses provide some protection, cost pass through remains partial across a sizeable portion of projects.

Operating margins of large EPC companies are therefore expected to moderate by 50-70 basis points to 8.2-8.4 percent this fiscal. The depreciation of the rupee could partly offset margin pressure for companies with significant overseas operations.

Despite the expected margin compression, Crisil Ratings expects credit profiles to remain stable, supported by higher execution, adequate cash generation and prudent balance sheet management. Interest coverage is projected at 3.5-4 times this fiscal, compared with 3.8 times last fiscal, while total outside liabilities to tangible net worth is expected to remain stable at 1.6-1.7 times.

Working capital management will remain a key monitorable, particularly as EPC companies continue to face pressure on collections from projects where receivables have remained elevated over the past few fiscals.