India's Infrastructure Powerhouse: EPC Giants Set for Double-Digit Growth by FY26

India's ambitious infrastructure push is set to electrify the financial performance of its leading Engineering, Procurement, and Construction (EPC) firms. A recent report by CRISIL Ratings paints a vibrant picture, projecting a robust 9-11% revenue growth for large, diversified EPC companies by fiscal year 2026.

This significant surge is primarily fueled by the government's aggressive capital expenditure strategy and an exceptionally healthy order book that promises sustained revenue visibility.

The bedrock of this anticipated growth lies in the substantial government capital expenditure across critical sectors.

With a steadfast focus on boosting the nation's infrastructure, the government's spending spree translates directly into a bounty of projects for these construction behemoths. Roads, railways, water, and irrigation schemes are identified as the primary accelerators, with power transmission and distribution also contributing significantly to the sector's upward trajectory.

A key indicator of this robust outlook is the outstanding order book, which is expected to reach a staggering Rs 8.5-9 lakh crore by March 2025.

This translates into a comfortable order book-to-revenue ratio of 3.5-4 times, providing these firms with remarkable revenue visibility over the next three to four years. This strong pipeline ensures that the growth momentum is not merely a short-term phenomenon but a sustained trend.

Financially, while higher interest rates might cast a moderate shadow on interest coverage, the sector's operating margins are anticipated to remain stable, hovering around 9-9.5%.

This, coupled with generally comfortable debt metrics, underscores the financial resilience of these large players. However, efficient working capital management remains a crucial lever for operational success, with gross current asset days expected to stabilize, signifying prudent financial discipline.

Despite the optimistic projections, the journey isn't without its challenges.

Timely project execution, the ability to effectively manage working capital, and navigating potential input cost inflation are critical factors that will dictate individual firm performance. Nevertheless, the overarching credit outlook for these diversified EPC firms remains stable, reflecting confidence in their ability to capitalize on the unfolding infrastructure revolution.

In essence, India's large EPC firms are not just building structures; they are constructing the very backbone of the nation's economic future, poised to deliver impressive financial results on the back of unprecedented infrastructure development.