EPC companies reach pre-Covid operating level, says Crisil report

By: |
January 28, 2021 3:15 AM

“Most developers are now operating at pre-pandemic levels, up from 70% of pre-pandemic levels at the end of June. Revenue growth for the June quarter had plunged 33% on-year due to the pandemic-led disruption in operations,” it said.

Large road EPC players are likely to see revenues recover and log a 15-20% growth in fiscal 2022, supported by their strong order books. With profitability remaining steady, their credit profiles would sustain as well, it said.Large road EPC players are likely to see revenues recover and log a 15-20% growth in fiscal 2022, supported by their strong order books. With profitability remaining steady, their credit profiles would sustain as well, it said.

Engineering procurement and construction (EPC) companies, engaged in road development, have reached their pre-Covid operating level as issues around availability of labour and raw material have largely been resolved, rating agency Crisil said in a report.

“Most developers are now operating at pre-pandemic levels, up from 70% of pre-pandemic levels at the end of June. Revenue growth for the June quarter had plunged 33% on-year due to the pandemic-led disruption in operations,” it said.

At the same time, operating profitability of the companies remained healthy at around 14.5% in the first half of fiscal 2021, down only marginally by 70-80 basis points over fiscal 2020. This was possible due to their sharper focus on cost reduction.

“This trend is expected to sustain in the second half as well, despite increasing steel (an input in road construction) prices,” Crisil said.

Moderation in overall revenue growth for road-building engineering, procurement and construction (EPC) companies will be limited to 5-8% this fiscal despite a 16% de-growth logged in the first half.

“This is because the players whose operations were impacted because of Covid-19-led lockdowns, have seen good revenue recovery since the second quarter, with order booking riding strong on steady awarding by government agencies and operations back to near normal. The pullback in revenue growth, together with continued prudent working capital management and healthy balance sheets, will help keep credit quality of road EPC companies stable,” Crisil said.

Large road EPC players are likely to see revenues recover and log a 15-20% growth in fiscal 2022, supported by their strong order books. With profitability remaining steady, their credit profiles would sustain as well, it said.

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