Mid-sized EPC segment revenue to grow 15% this fiscal

Strong order books and better operational preparedness in the second year of the COVID-19 pandemic will swell the toplines of mid-sized (revenue <`10 billion last fiscal) EPC (engineering, procurement and construction) companies by 15 per cent this fiscal, compared to a ~10 per cent fall last fiscal, according to a report by CRISIL Ratings.

A study of over 600 CRISIL-rated, mid-sized EPC companies engaged in construction of roads, commercial and industrial buildings, irrigation, and allied activities indicates as much. The aggregate topline of these players is estimated at Rs.700 billion for last fiscal.

“At over 2.5x of last fiscal’s revenue, order books were at their highest – at the beginning of any fiscal – since 2015, which offers high revenue visibility,” says Rahul Guha, Director, CRISIL Ratings. “The current operating rate of 70 per cent should also help the sector gain growth momentum in the rest of this fiscal.”

“Credit profiles will continue to be supported by rising accrual, limited capex and steady working capital cycle this fiscal,” says Shirish Mujumdar, Associate Director, CRISIL Ratings. “Gearing will likely be controlled at~0.5x, while interest coverage ratio will remain adequate at well over 4x.”