India’s Infra Boom, Running On Unpaid Bills

Built On Credit: Unpaid Government Bills Are Squeezing India's EPC Contractors

By Dev Chandrasekhar

Every results season, the managements of India's EPC companies, the engineering, procurement and construction firms that build the country's highways, water pipelines, power lines and factories, present a version of the same slide. The order book, which is the pipeline of contracted work yet to be executed, is at a record high. The investment cycle, they assure investors, has never looked healthier.

In FY26, every figure on that slide was accurate. The story was in the figures it left out.

India Ratings and Research closed the books on the sector's financial year this week, issuing a review that warrants attention. Revenue across its EPC portfolio grew 2.8%, against the double-digit growth management had promised at the start of the year. 

Operating margins, the share of every rupee of revenue left over as operating profit, slipped to 10.2%, a multi-year low.

Then there is the number that should bother anyone who owns or lends to these companies. Cash collected from operations accounted for about 29% of operating profit, compared with a historical average of nearly 65%.

For every Rs 100 of operating profit the sector reported in FY26, only Rs 29 arrived as cash. The remaining Rs 71 sat somewhere between the contractor's books and reality: in unpaid bills, retention money, work not yet invoiced, and disputed claims.

Both profits and cash collections fell for the second consecutive year. The order book still grew 14%, to roughly Rs 5 lakh crore, about three times annual revenue. The sector, in other words, is being asked to do more work for clients who are paying more slowly.

The Lenders In Question

Who are those clients? Overwhelmingly, the Indian state. Of the agency's 27% rating actions on the sector, eight were downgrades or outlook cuts. It is unusually direct about what drove them. 

Payment delays on Jal Jeevan Mission contracts, the Centre's rural tap water programme, and on state irrigation projects crushed the water-focused contractors. Shrinking workloads hurt the highway builders.

Even in power transmission, the one segment growing handsomely, money trapped in unpaid bills and half-finished work triggered downgrades despite healthy demand.

No company illustrates the squeeze better than NCC Limited, one of the country's largest builders. It pulled its FY26 forecast mid-year, citing extended monsoons, project delays and stretched client payment cycles. It was never reinstated. "No guidance as we speak," its head of strategy, Neerad Sharma, was still telling analysts in February.

The numbers are telling.

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$2.5 Billion

That's how much fresh funding India is seeking from the World Bank and Asian Development Bank (ADB) to shore up infrastructure spending, according to Bloomberg reports.

Context: India is in talks with multilateral lenders to secure about $2.5 billion from existing credit lines, as New Delhi lines up fresh sources of money after the West Asia conflict squeezed its spending capacity. The World Bank and ADB are discussing loans of $1.5 billion and $1 billion, respectively, with announcements expected within two months. The money is largely meant to boost urban infrastructure and create jobs.

This would fall under the broader $8-10 billion in annual financing over five years that India and the World Bank Group had already agreed on. The World Bank confirmed it's in talks over "possible support" for structural reforms aimed at boosting private-sector jobs and growth, though it didn't disclose the loan amount.

Why now: India is facing a wider-than-expected budget gap this financial year, having spent more on subsidies to cushion citizens from higher oil prices triggered by the Iran conflict, a country that imports over 80% of its crude.

The funding would supplement existing government programmes as PM Modi's administration pushes to upgrade India's infrastructure and fund urban renewal, part of the broader goal of becoming a developed economy by 2047. For context, the ADB has already committed $63.8 billion to India across 683 loans, grants and technical assistance, while India remains the World Bank Group's largest client with nearly $37 billion in commitments.

War Winds Begin To Ease

The United States and Iran signed a 14-point memorandum of understanding (MoU) on the sidelines of the G7 summit in Évian-les-Bains, France, marking the biggest breakthrough in relations between the two countries since 1979.

Origin: The agreement extends a ceasefire for 60 days while negotiators work toward a permanent peace deal. It calls for an end to hostilities, the reopening of the Strait of Hormuz, the lifting of US restrictions and sanctions on Iran, the unfreezing of Iranian assets, and the creation of a $300 billion reconstruction fund.

Break: However, the path to peace remains uncertain. US President Donald Trump warned that Washington could resume military action if Iran violates the agreement, while Israel has continued strikes in Lebanon despite international calls for a ceasefire.

The deal offers relief not only to a region battered by war but also to energy-importing economies across Asia. The reopening of the Strait of Hormuz is expected to increase oil supplies and ease pressure on fuel prices and inflation, including in India.

Fuel Retailers Under Pressure

India’s state-run fuel retailers are facing mounting financial strain as government-controlled pump prices remain well below global market levels despite the recent surge in crude oil prices, Reuters reported. Oil Secretary Neeraj Mittal said revenue losses at Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp have reached about Rs 1 trillion in the first quarter, pushing their borrowings toward operational limits.

Flashpoint: Supply disruptions also persist. Indian Oil and PetroChina have reportedly struggled to secure tankers for Iraqi crude cargoes as freight rates remain elevated. The pressure comes even as an interim US-Iran agreement paved the way for the reopening of the Strait of Hormuz.

The Shift: Three Saudi-flagged supertankers carrying 6 million barrels of crude reportedly sailed through the waterway on Thursday. More than 60 million barrels of crude trapped in the Persian Gulf are expected to flow into Asia, raising the prospect of oversupply and weaker oil prices in the coming weeks, according to a Bloomberg report.

However, renewed Israeli airstrikes in Lebanon have underscored the fragility of the broader regional ceasefire.

Trade Deal Incoming

India and the UK will bring their long-awaited free trade agreement into force on July 15, after resolving a dispute over British steel import restrictions that had threatened to delay its implementation. Prime Minister Narendra Modi and UK Prime Minister Keir Starmer confirmed the July rollout after talks on the sidelines of the G7 summit. The agreement, negotiated over nearly three years and signed in 2025, aims to deepen trade and investment ties between the world's fifth- and sixth-largest economies.

Fast Facts: Under the deal, India will gradually reduce tariffs on British products such as Scotch whisky and automobiles, while the UK will expand duty-free access for Indian exports, including textiles, footwear, gems and jewellery, and engineering goods. Both countries also agreed to extend social security exemptions for temporarily posted workers from three years to five years, reducing costs for businesses.

Impact: The UK government estimates the agreement will add £4.8 billion (about $6.5 billion) to British GDP and increase bilateral trade by £25.5 billion in the long run.

Vehicle Prices Head Higher

Tata Motors’ commercial vehicle business and Kia India on Thursday announced price increases as automakers contend with rising costs linked to the West Asia conflict. Tata said it will raise prices across its truck and bus portfolio by up to 2.5% from July 1, while Kia will increase prices across its model range by up to 2% from next month.

The Lead: The hike is intended to partially offset higher commodity prices and other input costs. Tata had previously raised commercial vehicle prices by up to 1.5% from April 1.

Setup: The announcements add to a broader trend across India’s auto industry. Earlier this month, Tata Motors Passenger Vehicles, Maruti Suzuki and Hyundai Motor India also raised vehicle prices, seeking to protect margins from escalating raw material and supply-chain costs.

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Markets Are Coasting On Hopes Of Oil Prices Staying Down

On Episode 905 of The Core Report, financial journalist Govindraj Ethiraj talks to Siraj Hussain, former Agriculture Secretary to the Government of India (and frequent columnist on agricultural and food production issues) as well as Ambareesh Baliga, Market Expert.

• Markets Are Coasting On Hopes Of Oil Prices Staying Down

• Oil Flows From West Asia Could Resume Faster Than Expected And The Demand Dynamics

• What A Surge In IPOs Means For The Market

• Decoding The Government’s Drought Plans And Why Farmers Have To Switch To Drought Resistant Crops

• Why The Rupee Is Likely To Stay Under Pressure For A While

• Why The Price Of The Next Iphone Could Be Much Higher Than Expected