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West Asia Disruptions Threaten EPC Margins Despite Stronger Growth
Large companies that build infrastructure are expected to earn slightly less profit from each project.
This is because materials, shipping and insurance have become more expensive.
Their revenue may still grow because governments and businesses are investing in power and infrastructure.
Power projects make up about one-quarter of their order books.
Renewable energy, thermal power and transmission projects are all contributing to demand.
Overseas work is also increasing, especially in the Middle East.
Work in the region was briefly disrupted by the West Asia conflict but has mostly returned to normal.
CRISIL Ratings says the lower margins are unlikely to seriously damage the companies’ financial strength.
CRISIL Ratings expects large EPC companies’ operating margins to decline 50–70 basis points to 8.2–8.4% this fiscal.
Revenue growth is projected to improve by 100–200 basis points to 9–10%, supported by power investment and infrastructure spending.
Higher cement, steel, bitumen, freight and insurance costs are pressuring margins, while materials represent 55–60% of total costs.
Power investments are expected to rise 15–20%, with renewable, thermal and transmission projects driving EPC demand.
Overseas orders increased to 33% of order books by March 2026, while credit profiles are expected to remain stable despite margin moderation.
- Who
- Large, diversified engineering, procurement and construction companies assessed by CRISIL Ratings.
- What
- Their operating margins are expected to fall while revenue growth and order-book visibility improve.
- Where
- The companies operate in domestic infrastructure markets and overseas markets, particularly the Middle East.
- When
- During this fiscal year; overseas order-book data is stated as of March 2026.
- Why
- Higher commodity, freight and insurance costs linked partly to geopolitical disruption are outweighing the benefits of stronger project execution.
Key facts
- Companies covered
- 14 large EPC companies with aggregate revenue exceeding ₹3.8 lakh crore last fiscal
- Projected operating margin
- 8.2–8.4%, down 50–70 basis points
- Projected revenue growth
- 9–10%, improving by 100–200 basis points
- Power investment growth
- Expected to increase 15–20% this fiscal
- Order book-to-revenue ratio
- Expected to rise to around 4 times from 3.5 times
- Overseas order books
- 33% of total order books as of March 2026, up from 28% a year earlier
- Expected interest coverage
- 3.5–4 times, compared with 3.8 times last fiscal
Quotes
Gautam Shahi
Senior Director at Crisil Ratings
“The power sector is emerging as the key swing factor for revenue growth among EPC players.”
financialexpress.com
“The anticipated margin moderation is unlikely to weaken credit profiles.”
financialexpress.com
Sources
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