Sustained government spending, steady capacity expansion in power, mining, oil and gas, metal and auto-linked sectors, and increasing opportunities from emerging segments such as data centres and electric vehicle (EV) infrastructure will ensure a revenue growth of 12-14% for the capital goods industry this fiscal, similar to last fiscal.

The ongoing developments in West Asia are unlikely to materially impact growth as diversified order books and limited regional exposure to the middle east provide a cushion with revenue largely accruing from the domestic market.

The operating margin is expected to remain range-bound at 12-13% this fiscal, supported by strong execution, long-term client relationships and improved operating leverage despite geopolitical cost pressure.

The credit profiles of capital goods companies rated by Crisil Ratings are expected to remain stable, led by healthy cash flow, low leverage and moderate capital expenditure (capex).

An analysis of 66 companies, mainly engaged in manufacturing of heavy electricals, earth moving and mining machinery, and process plant equipment¹, indicates as much. These companies had aggregate revenue of Rs 2.1 lakh crore in fiscal 2025, representing nearly half of the industry.

The order books of large companies² have risen ~1.5 times over the past two fiscals to Rs 5.2 lakh crore (as of December 2025) with the book-to-bill ratio improving to ~3.7 times in fiscal 2026 from 3.1 times in fiscal 2024. The growth is driven by increased power sector capex, raising its share to 50% from 32%, alongside steady growth in defence and railways outlays.

Says Aditya Jhaver, Director, Crisil Ratings, “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. Growth is further supported by increased government spending in key sectors such as railways and defence, where capex allocations this fiscal have risen 11% and 5%, respectively.”

Power capacity additions of 58–62 gigawatt (GW) this fiscal, led by renewables, should boost demand for heavy engineering and equipment. Transmission capex is expected to stay strong, driven by renewable integration, rising demand and grid modernisation.

Railway capex is set to recover, supported by expansion and modernisation, while defence spending continues to rise with a focus on indigenisation.

Private capex in core sectors such as steel, cement and oil and gas remains steady, driven by steady domestic demand even as emerging areas such as data centres and EV infrastructure gain traction.

Exports, which account for less than 20% of revenue, have remained resilient amid a volatile tariff environment last fiscal, and are expected to remain steady this fiscal, too.

Says Joanne Gonsalves, Associate Director, Crisil Ratings, “The overall credit outlook of the sector is expected to remain stable, supported by healthy revenue growth and strong balance sheets. This, along with moderate capex plans and low debt, should keep leverage metrics comfortable. Debt to earnings before interest, taxes, depreciation and amortisation for rated capital goods companies is projected at ~0.8 time and interest coverage ratio at ~11 times for this fiscal.”

Any sharp increase in commodity and freight prices owing to prolonged geopolitical uncertainties can defer capex by end-user industries as well as by the government due to increasing fiscal deficit. This could impact revenue growth and profitability and will, therefore, be monitorable.

¹ Process plant equipment consists of heat exchangers and evaporators, etc
² 13 companies comprising a fourth of the capital goods industry revenue