India EPC Sector Growth Slows to 4–5% in FY26 Amid Award Delays: India Ratings

India Ratings and Research (Ind-Ra) said the engineering, procurement and construction (EPC) sector ended FY26 weaker than expected due to lower award activity in 4QFY26, which has pushed revenue recovery into FY27. While underlying infrastructure demand remains intact, delays in project awards have increased near-term execution risks and postponed cash flow normalisation. Ind-Ra now estimates FY26 revenue growth at 4–5%, below earlier expectations, with FY27 recovery likely to be back-ended.

“The slowdown in award activity in 4QFY26 is more about timing than intent. While this delays revenue recovery and raises near-term risks, a strong tender pipeline and continued public capex support medium-term credit stability,” said Vijay Babu Konda, Associate Director, Corporate Ratings, Ind-Ra.

Total EPC awards declined sharply to Rs 1.19 trillion in 4QFY26, largely due to timing delays rather than any structural slowdown. Roads and power accounted for over 60% of awards, supported by National Highways Authority of India and state agencies, particularly in Maharashtra. However, muted activity in railways, irrigation and mining limited diversification, increasing earnings volatility and working capital pressure, especially for less-diversified players.

Despite near-term challenges, tendering activity remains strong. Tender announcements rose 18% sequentially in 4QFY26 to Rs 4.38 trillion, maintaining a quarterly run rate of around Rs 4 trillion. An active pipeline of about Rs 1.4 trillion, led by roads, followed by buildings, irrigation and power, supports medium-term visibility. However, the lag between tendering, award and execution is expected to constrain near-term growth and delay improvement in operating cash flows.

Ind-Ra has maintained a neutral outlook on the EPC sector for FY27 and revised the roads EPC outlook to neutral. It expects FY27 revenue growth of around 10%, significantly lower than the 20% average seen during FY22–FY24, with margins likely to stabilise due to competitive bidding.

The broader capex environment remains supportive but uneven. Central government capex is expected to grow about 12% in FY27, while state capex may grow around 16%, supporting EPC cash flows. Private sector capex, however, is likely to remain in the mid-single digits, limiting a broad-based recovery in project awards.

Ind-Ra said sector-wide stress is unlikely, but recovery in earnings will remain gradual. It highlighted the need to monitor award conversion in early FY27, working capital intensity, exposure to central and state agencies, and companies’ ability to sustain margins in a slower growth environment.