E - PAPER

CURRENT MONTH

LAST MONTH

VIEW ALL
  • HOME
  • NEWS ROOM
  • COVER STORY
  • INTERVIEWS
  • DRAWING BOARD
  • PROJECT WATCH
  • SPOTLIGHT
  • BUILDING BLOCKS
  • BRAND SYNC
  • VIDEOS
  • HAPPENINGS
  • E-MAGAZINE
  • EVENTS
search
  1. Home
  2. ALLIED

Slow National Highway Work Makes EPC Companies Look for Diversification

Slow National Highway Work Makes EPC Companies Look for Diversification

BY Realty+
Published - Friday, 25 Apr, 2025
Slow National Highway Work Makes EPC Companies Look for Diversification

Slow national highway (NH) awarding has accelerated the pace of road engineering, procurement and construction (EPC) companies’ order book diversification. Consequently, companies will see the share of non-road segments in their order book more than triple to ~35% by the end of fiscal 2026, compared with ~11% as of March 2020.

While diversification strengthens road EPC players' business profiles, it may also expose them to risks related to project execution, payment delays from counterparties, and potential strain on working capital cycles. Comfortable balance sheets can mitigate some of these risks, though. According to a recent analysis by CRISIL Ratings, 20 large road EPC players accounting for around half of the sector’s revenue indicate as much.

Anand Kulkarni, Director, Crisil Ratings, said, “Road EPC players focus on high growth sectors such as renewable power and transmission. India’s push towards green energy transition will see these sectors double up on capital expenditure (capex) to Rs 4.1-4.3 lakh crore over the current and next fiscal. The players have also increased presence in other sectors of Government focus like railways, metros, and water supply and sanitation, with an overall planned outlay of ~Rs 4 lakh crore1 this fiscal. These sectors will continue to form a considerable part of their order books.”

While there is limited growth in budgetary allocation for railways this fiscal, focus on areas like high-speed rail and station redevelopment will provide opportunities. Metro projects are expected to continue capex momentum supported by rising urbanisation. While capex for water supply and sanitation, driven by state governments and centrally sponsored programmes2, is expected to grow modestly this fiscal, it will continue to be one of the key sectors in the order books.

To be sure, road EPC players started exploring diversification opportunities after the sharp dip in NH awarding in fiscal 2019 to insulate themselves from a downturn in the road sector. With the recent slowdown in NH awarding3 as the road sector transitions to a new mode of awards and faces persistent land acquisition issues, the pace of diversification of road EPC players has accelerated.

That said, entry into new segments does have its challenges. The first challenge is exposure to execution risks. For example, power transmission is exposed to right-of-way (ROW) and forest clearance issues as these are under the purview of developers. Metro and urban development projects may also face ROW issues as these are implemented in densely populated urban areas.

The second challenge is the possible dilution of the counterparty risk profile. As against central counterparties in NH projects, the other sectors predominantly have state governments or authorities as counterparties whose average credit risk profiles may result in longer payment cycles of 120-180 days from 60-90 days currently, thus impacting cash flows and, consequently, project execution.

Saina S Kathawala, Associate Director, Crisil Ratings, said, “Despite the attendant risks in non-road sectors, credit profiles of road EPC players are expected to remain stable, supported by significant deleveraging from

strong cash flows and monetisation of assets. This is reflected in the expected total outside liabilities to tangible net worth (TOL/TNW) ratio of a healthy ~0.65 time this and the next fiscals. This will enable the players to withstand the stress of working capital cycles and new investments. Also, players are diversifying in a calibrated manner and bidding discipline is expected to be adequate.”

RELATED STORY VIEW MORE

Large Cement Companies Report Volume Growth
InvITs In India Eye Tripling The AUM In Next Five Years
Knest Receives Rs 300 Cr Investment from Lighthouse Funds

TOP STORY VIEW MORE

Retail as a Real Estate Anchor: Redefining Tier 2 Cities

Umang Jindal, Founder at Homeland Group talks about driving urban growth through commercial projects.

29 May, 2025

US Based Panattoni To Invest €100 Million In India’s Key Industrial Hubs

29 May, 2025

Africa’s Dubai — Lagos Mega-City With Luxury Homes

29 May, 2025

NEWS LETTER

Subscribe for our news letter


E - PAPER


  • CURRENT MONTH

  • LAST MONTH

Subscribe To Realty+ online




Get connected with us on social networks!
ABOUT REALTY+

Started in 2004, Realty+, an exchange4media group publication is one of the most respected real estate magazines in India with offices in Delhi, Mumbai and Bengaluru.

Useful links

HOME

NEWS ROOM

COVER STORY

INTERVIEWS

DRAWING BOARD

PROJECT WATCH

SPOTLIGHT

BUILDING BLOCKS

BRAND SYNC

VIDEOS

HAPPENINGS

E-MAGAZINE

EVENTS

OTHER LINKS

TERMS AND CONDITIONS

PRIVACY-POLICY

COOKIE-POLICY

GDPR-COMPLIANCE

SITE MAP

REFUND POLICY

Contact

Mediasset Holdings 3'rd Floor, D-40, Sector-2, Noida (Uttar Pradesh), Pincode - 201301

tripti@exchange4media.com
realtyplus@exchange4media.com

+91 98200 10226


Copyright © 2024 Mediasset Holdings.
Rental Mobil bandung,Sewa Mobil Bandung, Rental bandung, Sewa Mobil, Jual Mesin Antrian, Harga Mesin Antrian, Mesin Antrian Murah, Jual KIOSK,Mesin Antri, Berita Terkini, Info Bray,Info Tempat Wisata,Portal Berita,Jasa Website