Since the start of 2024, analysts have voiced growing concerns about the high exposure of Indian engineering firms to a single export market — West Asia. The ongoing regional conflict that began in February is now putting the resilience of Indian engineering and capital goods companies to a dual test — their ability to secure new orders in the immediate term and their capacity to protect future revenue.

For the last three to four years, West Asia — and the GCC in particular — has served as a darling market for Indian engineering and capital goods firms. Driven by oil wealth and an ambition to transition toward a green economy, these nations have been awarding multi-billion-dollar contracts to global firms, including those based in India.

However, US President Donald Trump’s offensive in Iran and Tehran's subsequent retaliatory attacks across GCC countries have brought this period of rapid expansion to an abrupt halt.

For Indian firms, some of which maintain exposure as high as 37% of future revenue, the situation has evolved into a significant test of corporate resilience.

Signs of stress are already emerging. Analysts now anticipate the industry may report an earnings decline at a rate not seen since the peak of the pandemic.

This projected downturn is attributed to operational disruptions caused by energy shortages within India or direct project exposure to the volatile Gulf region. Indian firms are already looking for alternative markets to diversify.

The Order Inflow Casualty

The immediate casualty of the US-Israel-Iran conflict, now in its sixth week, has been the receipt of new orders. A scan of company announcements and business intelligence tracking firms in West Asia reveals that no major new contracts have been awarded during this period.

State-linked oil giants, including Saudi Aramco and Qatar Energy — major sources of high-value orders — have reportedly suffered damage of varying magnitudes across at least one of their respective sites.

Prashant Vasisht, Senior Vice President and Co-Group Head of Corporate Ratings at ICRA Ltd, provided a nuanced perspective on these shifting order trends.

“New order inflows for capital goods companies with a sizable exposure to West Asia could be temporarily impacted due to the delay in finalisation of infra projects and deferment of public/ private capex in the region,” said Prashant Vasisht, senior vice president and co-group head, Corporate Ratings, ICRA Ltd. “That said, certain big players in the T&D space continue to witness traction in terms of fresh order inflows from West Asia.”

The current lack of orders in March 2026 stands in contrast to the industry's prior expectations. Before the war, multiple capital goods firms had pointed to a robust pipeline of international orders largely dependent on Gulf nations.

Notably, in March 2025, L&T secured its largest-ever order by value from Qatar Energy.

While ceasefire negotiations currently appear to be on thin ice, any eventual resolution could shift the focus toward reconstruction.

Vasisht noted that while the duration of the current ceasefire remains uncertain, there is an expectation of a surge in demand led by rebuilding requirements in adversely impacted markets once the conflict eases or concludes.

Projected Revenue Impact

Analysts at Motilal Oswal noted the capital goods sector is projected to report the first quarter of earnings decline since 3QFY21 (December 2020 ended quarter) of 6% YoY. That was the peak of the pandemic, having slowed down industrial activity across the globe.

“Ordering activity for EPC players from international markets remained strong until Feb’26, particularly on the transmission segment. However, we expect revenue execution to be affected, particularly for orders from the Middle East for players like L&T and KEC, and marginally for Kalpataru projects,” the analysts said.

Motilal Oswal estimates L&T January-March 2026 ended quarter order wins (announced so far) at Rs 14500 crore.

Data compiled by The Core from BSE announcements places Q4 order wins for KEC International at Rs 4,548 crore and Kalpataru Projects at Rs 7,629 crore. Among these, only KEC International explicitly disclosed a GCC-based order in early March, though its value remained undisclosed.

Beyond these major players, Tata Projects entered an EPC agreement with UAE-based SAF One Energy in January. Additionally, a host of smaller Indian engineering companies maintain exposure to West Asia through various ancillary segments, including water infrastructure.

Mirae Asset Sharekhan noted that while the sector has remained broadly resilient amid the turmoil, specific players like Larsen & Toubro, KEC International, and Kalpataru Projects International—which have projects deployed directly in Gulf countries—face higher risks.

The outlook remains bleak for both construction firms and exporters. Pankaj Chadha, Chairman of EEPC India, noted that the war in Iran has severely impacted engineering goods exports.

“Since the UAE and Saudi Arabia are among the key markets for engineering exports, we see shipments to these countries falling in the month of March. Moreover, high energy prices are likely to slow down growth in major parts of the world, and this will have a negative impact on engineering exports,” Chadha added.

Further, even those engineering for India and within India are facing an input crunch. JM Financials, in a recent report on BHEL, estimated a revenue shortfall of Rs 2500- 3000 crore in the March 2026 quarter, as a shortage of gases is likely to impact operations.

Sailing To Alternate Markets

Since February 2024, a couple of analysts have flagged the need to diversify engineering in foreign markets. The advice may finally be heeded, with companies exploring alternatives.

Vasisht noted Indian companies are building their presence in the USA and neighbouring countries. Further, with the easing of tariffs in the USA and the trade deal signed with the EU, companies are likely to witness incremental inflows from these markets. He added that order activity from other regions, such as the US and Africa, continues to be healthy. The data centre-led demand in the US has created significant scope for Indian capital goods companies across sub-segments.

L&T executives in recent media interactions have noted, as part of their diversification efforts, the company is also looking at moving into newer geographies, including Indonesia and Australia, and is also in talks with oil companies in Africa, he said.

In a press statement announcing an overseas order win this month, Vimal Kejriwal, managing director and chief executive officer for KEC International, said, “Our international T&D ( transmission and distribution) order book continues to diversify across geographies. The successive order wins in Africa reflect a recovery in the T&D market in that region.”

While alternative export markets exist, the reason these firms flocked to West Asia was the scale and volume it promised. In terms of orders from within Indian borders, the private sector clients have been slow to catch up. As of December, at least Rs 3 trillion worth of Indian firms' capital goods orderbook was concentrated in West Asia. These are indeed big shoes to fill.