IndiPosted at: Jul 26 2021 4:26PM Large EPC companies may see 20pc jump in revenue in FY22, estimates Crisil Ratings
New Delhi, Jul 26 (UNI) Helped by strong order books, improved project execution and government's thrust on infrastructure, large and diversified engineering, procurement and construction (EPC) companies may see 20% jump in their revenues during the current fiscal.
"With lockdowns progressively easing, execution has picked up from the second quarter. That will strengthen through this fiscal, the way it did in the last fiscal. We expect this to boost revenue by 20% this fiscal, to well over the fiscal 2019 level,” said Manish Gupta, Senior Director, CRISIL Ratings.
The projection is based on the study of eight large EPC companies in the areas of civil infrastructure, transportation, power, and oil and gas among others and with aggregate revenue of Rs 1.5 lakh crore.
While operating margins may moderate slightly due to higher cost of inputs particularly steel, an improvement in the working capital position and strong balance sheets should support credit profiles, the study estimated.
Naveen Vaidyanathan, Associate Director, CRISIL Ratings said that amid strong revenue growth, operating margins may moderate by 20-40 basis points to 9.3-9.5% this fiscal as over 85% of the costs of EPC companies are variable in nature, and prices of key inputs such as steel are likely to increase 23-25% on-year.
"This will have to be absorbed in the case of fixed-price contracts, which account for a fourth of all contracts, while for the remaining, it will be passed on with a lag,” said Vaidyanathan.
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