India’s EPC Sector Set for Revenue Rebound in FY27 as Capex Cycle Broadens, Reports Ind-Ra

Mumbai, March 4, 2026: India’s construction and engineering sector is poised for a significant turnaround in the coming fiscal year. According to a new report released today by India Ratings and Research (Ind-Ra), revenue for Engineering, Procurement, and Construction (EPC) companies is expected to grow by approximately 10% year-on-year in FY27. This projected recovery follows a two-year sluggish period during FY25 and FY26, where growth remained in the single digits, a sharp contrast to the 20% compound annual growth rate seen between FY22 and FY24.

The anticipated growth is being driven by a broadening capital expenditure cycle. Ind-Ra expects central government capex to grow by 12%, while state-level capex is projected to rise by roughly 16%. Private sector investment is also expected to accelerate, albeit at a more modest mid-single-digit pace. These figures are closely tied to the nominal Gross Fixed Capital Formation (GFCF), which is forecasted to grow at 13.1% in FY27, up from 8.3% in the current fiscal year.

Specific sub-sectors show varying degrees of momentum. The Power and Transmission & Distribution (T&D) segment holds an improving outlook due to steady order flows and margin gains, while the Roads and Railways sectors maintain a neutral outlook. Though the Jal Jeevan Mission and other water-related projects faced a sluggish period over the last two years, higher budget allocations are seen as a positive sign, though analysts note that actual spending remains a key factor to watch.

“The centre’s capex growth in FY27 has been projected at 12%, after a muted 4% yoy increase in FY26. Over 85% of the centre’s capex budget continues to be allocated to roads, railways, finance (primarily interest‑free loans to states) and defence. Further, Ind-Ra estimates the state capex to rise 16.4% yoy in FY27, up from 10%-12% yoy in FY25-FY26, supported by higher capital grants from the centre. Private sector capex, however, may remain sector-specific and is expected to deliver mid-single digit growth in FY27, while central public sector enterprises (CPSEs) are likely to maintain momentum,” says Krishan Binani, Director of Corporate Ratings at India Ratings and Research.

Financially, EPC companies are expected to maintain stable margins of around 10.6% despite heightened competition and a shifting business mix. Credit metrics are also set to improve, with interest coverage expected to rise to 3.3x. This financial strengthening is supported by an improving working capital cycle following the election-related disruptions of FY25. Additionally, the adoption of surety bonds is picking up, and a robust pipeline of Public-Private Partnership (PPP) projects worth over INR 17 trillion is expected between FY26 and FY28.

While the liquidity profile for these firms remains adequate, the report highlights several key risks that could dampen this outlook. Slower-than-expected growth in state or private capex, weather-related disruptions, spikes in commodity prices, and a potential global economic slowdown remain the primary concerns for the sector heading into the next fiscal year.