Order book position of road EPC companies to improve further: CRISIL

Credit Rating Information Services of India Ltd (CRISIL) has informed the media that engineering, procurement and construction (EPC) companies are further expected to improve their order book position, from over three times the revenue at present, supported by new project awarding momentum. As per CRISIL, asset monetisation in the roads sector will accelerate with the expected growth of EPC companies in the same field, helped by different government initiatives. Earlier, Associate Director of CRISIL, Priyanka Patawarisay had told the media that with the low impact on business performance and their healthy capital structure, the credits of the sample set of road EPC firms are expected to remain steady. A continued prudent working capital management could increase the total outside liabilities to the total tangible net worth ratio by about 1.5 times in FY21, said Patawarisay. Patawarisay had said that, due to lower operating profits, the interest coverage ratio is expected to reduce to 3 times from 3.5 times in FY20. Revenues for large road EPC companies are expected to recover and grow by 15-20% in FY22, thanks to strong order books. The credit profiles would also be stable if they maintained their profitability. While operations at most project sites have stabilised, the ability of road EPC firms to maintain growth momentum and manage liquidity in the face of the ongoing pandemic will be a key metric to watch. Image Source