Higher govt capex help infra companies clock 17-20% revenue growth

16 Feb 2023 CW Team

Higher government spending on infrastructure in FY24 will propel engineering, procurement, and construction companies to hit revenue growth of 17-20 per cent, taking their profit to the pre-Covid level, a report said on Tuesday.

In the Budget 2023-24, the government has increased the outlay for capital expenditure (capex) on infrastructure sector by 33 per cent from Rs 7.5 lakh crore to Rs 10 lakh crore.

Forecasting higher revenue and thicker bottom-line, rating agency Crisil in a report also placed their credit outlook positive citing improving debt metrics.

The optimism is supported by the expected strong order inflows due to the government thrust on infrastructure in the latest budget.

Profitability of large EPC (engineering, procurement, and construction) companies is seen improving and reaching pre-pandemic levels of 10-10.5 per cent next fiscal compared to 9-9.5 per cent this fiscal, with commodity prices easing.

With healthy order books and recovery in profitability, debt metrics will also improve next fiscal as higher order inflows will boost their top-line to the tune of 17-20 per cent in fiscal 2024, up from 13-15 per cent estimated this fiscal, said the report which is based on an analysis of 80 EPC companies with aggregate revenue of Rs 2.33 lakh crore.

The revenue growth of most of the EPC players is driven by the rise in capital outlay by the Centre, public sector undertakings and states for the infrastructure segment and the corresponding construction intensity in each of the infrastructure segments.

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