Whalesbook
Sustained Momentum Expected
The Indian capital goods industry is projected to maintain its double-digit revenue growth streak into fiscal year 2027, with Crisil Ratings forecasting expansion of 12-14%. This positive outlook is underpinned by ongoing government investment in infrastructure, rising private sector capital expenditure, and substantial order backlogs. These trends are similar to the previous fiscal year, although global geopolitical and trade uncertainties could pose challenges.
Demand Drivers Solidify
Demand for capital goods is expected to remain robust across major sectors such as power, mining, oil and gas, metals, and automobiles. Emerging areas like data centers and electric vehicle (EV) infrastructure are also creating new growth opportunities. Crisil indicated that current Middle East developments are unlikely to significantly disrupt this momentum, as companies have diversified order books and limited direct exposure to the region, with most revenue originating domestically.
Energy Sector Fuels Growth
The capital goods sector's expansion is significantly driven by substantial capital expenditure in the energy segment, particularly in renewable energy and transmission infrastructure. Aditya Jhaver, Director at Crisil Ratings, noted, "We expect capital goods companies to report revenue growth of 12-14% this fiscal, driven by strong double-digit growth in capex spends across the power sector, particularly the renewable energy value chain." Increased government spending in railways and defense, with allocations up 11% and 5% respectively, further supports this growth trajectory.
Infrastructure Investment Drives Demand
Crisil anticipates the addition of 58-62 gigawatts (GW) of power capacity this fiscal, largely from renewable energy projects. This significant capacity expansion is expected to boost demand for heavy engineering equipment and related infrastructure. Investments in transmission infrastructure are also projected to remain strong, supported by grid modernization efforts, rising electricity demand, and the integration of renewable energy sources.
Order Books Swell, Margins Stable
An analysis of 66 rated companies, representing nearly half of the industry's revenue, showed aggregate revenues of approximately ₹2.1 lakh crore in FY25. Major companies have experienced substantial growth in their order books, reaching ₹5.2 lakh crore by December 2025, a 1.5-fold increase over two fiscals. The book-to-bill ratio improved to about 3.7 times in FY26 from 3.1 times in FY24, indicating strong project inflows. While geopolitical tensions can create cost pressures, operating margins are expected to remain stable at 12-13%, thanks to efficient execution, established client relationships, and improved operating leverage. Joanne Gonsalves, Associate Director at Crisil Ratings, stated, "The overall credit outlook of the sector is expected to remain stable, supported by healthy revenue growth and strong balance sheets." Leverage metrics are projected to stay comfortable, with a debt-to-Ebitda ratio around 0.8 times and an interest coverage ratio near 11 times for rated companies this fiscal. However, Crisil cautioned that a sharp increase in commodity or freight prices due to prolonged geopolitical issues could potentially delay investments and affect sector profitability.