India Ratings Expects Mid-to-High Single-Digit Growth for EPC Sector in FY26 Amid Sluggish Tender Activity
According to Ind-Ra, the EPC sector is expected to record mid-to-high single-digit revenue growth in FY26, despite muted tendering and sluggish awarding activity. The report notes that 2QFY26 project awards declined 13% year-on-year, while 1HFY26 awards dropped 27% compared to the previous year.
Ind-Ra highlighted that awarding activity typically peaks in Q4, making it a critical period for the sector, especially given the lower order inflows in key segments such as roads and highways. The sector has entered FY26 with reduced revenue visibility compared to FY24-end and will require timely and substantial project awards to sustain growth momentum through FY26–FY27.
The number of tenders announced has picked up in 2Q to over INR4.3 trillion, albeit marginally down yoy, indicating a robust pipeline of awards in coming quarters. 1H tender announcements surged to nearly INR8 trillion, highest in any 1H of a fiscal year. Basis the robust tender announcement activity, Ind-Ra anticipates a pickup in order awarding activity in 2HFY26, driven by large government contracts in roads, railways, and renewables.
Highway sector awards slumped to below INR100 billion, lowest quarterly award rate in the past five years. Recent policy measures such as the tightening of eligibility criteria considering quality issues and delays, norms of 90% of land availability before awards, better coordination with states for faster execution, are likely to improve the pace of execution when award pace picks up in coming quarters. Encouragingly, tenders announced in the roads sector surged to a multi-quarter high of INR1.9 trillion. The Central Road Ministry has said it has plans to bid out 124 highways and expressways projects worth INR3.4 trillion in 2025-2026.
The mining segment saw significant award boost in 2QFY26, accounting for over a third of awards. Real estate was the second-largest contributor to awards, although coming off a high base in 1QFY26. Ind-Ra expects award momentum to climb in coming quarters. Railways awards recovered, although the sustenance of this pace is critical for the FY27 outlook. Irrigation contract awards recovered with multiple awards by various state authorities. Power sector awards slumped in the quarter, although it is likely to recover in coming quarters.
Out of the overall orders awarded in 2QFY26, Madhya Pradesh and Maharashtra comprised 21% and 17%, respectively (2QFY25: 14% and 24%), respectively. Madhya Pradesh award momentum was so significant that it contributed a third of awards in the quarter. Other states which witnessed decent yoy growth in awards were Telangana and Andhra Pradesh.
The tenders floated in the roads segment contributed to over one third of announcements, witnessing significant growth. Real estate and water (including irrigation and sewage) accounted for 18% and 13%, respectively, in 2QFY26 (1QFY26: 21% and 19%). Out of the overall tenders floated in 2QFY26, Maharashtra, Gujurat and Karnataka comprised 17%, 8% and 8%, respectively (2QFY25: 11%, 6% and 5%). The tenders spread across Andhra Pradesh and Odisha grew 121% yoy and 48% yoy, respectively, in 2QFY26.
“EPC sector’s wait for acceleration in awards continued in 2Q, with 1HFY25 awards down 27% yoy. The silver line is the robust increase in tenders announced with 1H announcements hitting a high of INR8 trillion, lifting hopes of a recovery in 2H. Yet, heightened global uncertainty, government’s focus on prioritising consumption, and sector-specific headwinds continue to cloud the prospects of the sector, foreshadowing sluggish revenue and profitability growth in FY26, despite a benign base of FY25”, says Krishan Binani, Director, Corporate Ratings, Ind-Ra.
Ind-Ra has maintained a neutral outlook on the construction sector for FY26, while keeping a deteriorating sub-sector outlook for roads EPC. Ind-Ra expects the EPC sector revenues to grow at 10%-12% yoy in FY26, lower than earlier expected, following a weaker actual growth of 4%-6% growth in FY25 compared to the estimated 8%- 10% growth; this will also be much weaker than the FY22- FY24 CAGR of around 18%-20%. This is driven by the modest growth in central budget for FY26, a continued shift of state spending away from capex, and mixed trends on private capital spending. The centre's own capex growth in FY26 has been scaled back to 10%, a marked decline from 30% CAGR over FY20-FY24, with higher allocations to states and Production-linked Incentive scheme to spur state and private sector spending. While states' capital spending is expected to recover 14.5% yoy in FY26 (FY25: 5.1%), aided by increased capital grants by the centre, the increased welfare spending commitments are likely to pose a downside risk. Private sector capex has seen a sector-specific rebound, which is expected to sustain, and central public sector enterprises' capex is likely to see continued momentum.
Published on:
27 October 2025
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