Capital goods firms to see revenue growth of up to 18% this fiscal, says Crisil

‘This takes forward two consecutive strong years for a sector that saw sluggish growth in the decade through fiscal 2021’

Capital goods companies are expected to see revenue growth of 16-18% this fiscal — despite a high base of 20% growth last financial year — on improved execution amid rising orders, Crisil said in a report.

“Revenue growth is expected to remain healthy, in double digits, at 10-12% next fiscal as well, supported by a strong order backlog and steady inflow of fresh orders. This takes forward two consecutive strong years for a sector that saw sluggish growth in the decade through fiscal 2021,” the rating agency said.

“Along with higher commodity prices, rising government and private sector spend on infrastructure and steady improvement in private capital expenditure in consumption-based sectors, including due to investment in production linked incentive (PLI) schemes, have resulted in strong order book growth,” it added.

This segment comprises engineering, procurement, and construction service providers (excluding road and civil construction) and manufacturers of equipment.

The order book expanded 14% on-year in fiscal 2022 and by 9% in the first half of this fiscal to ₹3.9 lakh crore. Consequently, the order book as of September was 3.82 times the revenue in fiscal 2022, up from the pre-pandemic (March 2019) level of 2.94 times, Crisil said.

“Supportive public expenditure stemming from sustained government thrust on infrastructure and focussed execution augur well for capital goods companies supplying to cement, energy, and steel product manufacturers,” said Anuj Sethi, senior director, Crisil Ratings.

“Further, capacity is being built for PLI-driven schemes in automobiles, pharmaceuticals, energy, electronics and textile segments, which is opening up opportunities for equipment sales this fiscal and the next,” he added.