Indian EPC Sector Poised for Robust 9-11% Revenue Growth in FY25, CRISIL Forecasts

India's Engineering, Procurement, and Construction (EPC) sector is gearing up for another year of significant expansion, with credit rating agency CRISIL projecting a healthy 9-11% revenue growth in fiscal year 2025. This follows an even more impressive 15-17% surge estimated for fiscal year 2024, signaling continued momentum for the nation's infrastructure development.

The optimistic outlook is primarily anchored by the central government's unwavering commitment to capital expenditure, which has been the bedrock of growth for EPC players.

A robust order book-to-revenue ratio, consistently maintained at a comfortable 2.5-3.0 times, ensures a sustained pipeline of projects for these giants, offering strong revenue visibility.

Key sectors driving this growth trajectory include roads, railways, urban infrastructure, and water supply projects.

The power sector, particularly in transmission & distribution (T&D) and renewable energy, is also expected to contribute significantly to the order inflows. These segments collectively form the backbone of India's infrastructural push, directly benefiting EPC companies.

While the FY25 growth is slightly moderated compared to FY24, which saw exceptionally high growth due to a large existing order book, faster execution, and significant new order intakes in the latter half of FY23 and first half of FY24, the underlying sentiment remains positive.

The deceleration in FY25 is attributed to a likely moderation in execution pace and potentially slower order intake growth compared to the previous period's highs.

Despite the competitive landscape, operating profitability for EPC players is anticipated to remain stable, hovering around 9.5-10.0%.

This stability is a testament to efficient project execution, better cost management, and a favorable trend in input costs. Larger, well-established players, in particular, are expected to demonstrate superior execution capabilities, leading to better cost efficiencies.

However, the sector is not without its challenges.

Intense competition among players can sometimes exert pressure on margins. Furthermore, effective working capital management remains a crucial factor, given the long project cycles and substantial upfront investments required. Timely project clearances and land acquisition hurdles also continue to be areas requiring careful navigation.

CRISIL's analysis suggests that the credit profiles of EPC companies will remain comfortable, primarily supported by healthy cash accruals and prudent capital structures.

This financial resilience positions the sector well to continue playing a pivotal role in India's journey towards becoming a global economic powerhouse, as its infrastructure continues to expand and modernize.