MUMBAI: This fiscal year, diverse engineering, procurement, and construction (EPC) firms are expected to see a 12–14 per cnet increase in income due to robust order books that include both domestic and foreign contracts, as well as a stable pace of execution in the infrastructure sector. That comes after five fiscal years of 10 per cent yearly growth through 2024.
“Overall investment in the infrastructure sector is likely to grow 12-14 per cent in FY24-25, driven by continued momentum in the budgetary outlay by the Centre and states and pick-up in the private sector. The share of private investments is expected to increase to 12 per cent this fiscal from 9 per cent estimated last fiscal, driven by revival of the build-operate-transfer mode in the roads sector and increased private participation in the capacity additions in power segment,” says Says Gautam Shahi, Director, CRISIL Ratings.
According to a release, for the past three fiscal years, diversified EPC companies have maintained a healthy order book (estimated at 3.2–3.5 times the fiscal 2024 revenue as of March 2024) and strong revenue growth as a result of the Center and the states’ healthy awarding and capital outlays for the infrastructure segments.
According to a CRISIL Ratings report, there were 13 big and 162 small and mid-sized diversified EPC companies. Their estimated total revenue for the previous fiscal year was Rs 3.5 lakh crore, which accounts for one-third of all construction spending in India.
The government push for infrastructure growth, along with increase in public-private partnerships, will play a key role in supporting domestic revenue growth this fiscal, while companies having diversification into other geographies will support overseas revenue growth. For the record, the share of overseas orders has increased to 25 per cent of the current order book from 15 percentage five years back, the release further added.
The operating margin, which declined to 8.0-8.5 per cent over the past three fiscals from early double-digits in the previous fiscals, is estimated to have bottomed out with near completion of the low-margin, competitively bid legacy orders. The margin is anticipated to increase to 8.5–9.0 per cent in this fiscal year due to the execution of high-margin foreign orders and stable input prices such as steel and cement, even though intense rivalry in some industries could be a hindrance, the announcement stated.
Despite its high level, the working capital cycle has been stable over the last five fiscal years and is predicted to stay that way.
