India’s capital goods and power equipment sector is projected to experience a subdued performance in the first half of FY27, before witnessing a meaningful rebound in the second half. According to a research report by 360 ONE Capital, the expected recovery will be primarily driven by a multi-year thermal power ordering cycle and robust public capital expenditure.
Key Drivers & Growth Indicators
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Thermal Power Ordering Pipeline: Surging domestic electricity demand is increasing the need for baseload power generation. State utilities and power producers are issuing fresh tenders and finalizing medium- and long-term Power Purchase Agreements (PPAs), providing strong multi-year revenue visibility for equipment manufacturers.
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Easing Supply Chain Bottlenecks: Original Equipment Manufacturers (OEMs) have expanded production capacity for essential components, including gas-insulated switchgear (GIS) and transformers. This capacity addition is gradually bringing down equipment lead times and easing project execution hurdles for EPC firms.
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Public Capex Momentum: Government infrastructure spending remains steady, with 28% of the ₹12.3 lakh crore FY27 capital expenditure target already deployed (compared to 24.5% during the corresponding period of FY26), spending around ₹3.4 lakh crore so far.
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Bioenergy Push: Policy priorities surrounding energy security—supported by initiatives like GOBARdhan—are supporting medium-term demand for bioenergy projects, particularly Compressed Biogas (CBG) and ethanol capacity additions.
Challenges & Margin Drag
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Middle East Geopolitical Disruptions: Engineering, Procurement, and Construction (EPC) companies with high exposure to the Middle East continue to face execution delays and logistics friction due to ongoing regional conflict.
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Margin Compression: While sector-wide net profit (PAT) grew by 12.8% year-on-year—supported by lower interest costs and corporate deleveraging—EBITDA margins contracted by 69 basis points due to elevated raw material and commodity prices linked to geopolitical tensions.
