Road construction.
Road construction.. Image Source: IANS News

New Delhi, Dec 7 : Strong order execution will swell the revenue of road engineering, procurement and construction (EPC) companies by 15 per cent this fiscal, compared to 5 per cent in the pandemic-marred last fiscal, said Crisil Ratings.

However, operating profitability will moderate by 100-150 basis points on-year due to surging raw material prices and increasing competition.

Even so, credit profiles of these players will remain stable, the ratings agency said, citing that the trend will be supported by their healthy order books, well-managed balance sheets, prudent working capital management, and steady cash accruals.

"With fewer restrictions on construction activities during the second wave of the pandemic, road project execution was not impacted as severely as during the first wave," said Anuj Sethi, Senior Director, Crisil Ratings.

"This has manifested in healthy revenue growth of 37 per cent on-year in the first half of this fiscal, albeit on a significantly weak base of last fiscal," he added.

According to Sethi, while the overall revenue is expected to grow 15 per cent this fiscal, operating margins are likely to moderate to 14 per cent from 15.3 per cent last fiscal, primarily because of a sharp increase in prices of inputs such as bitumen, steel, cement and fuel.

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