Representational image | Ruhani Kaur | Bloomberg File Photo
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Mumbai: Investors are piling into shares of Indian roadbuilders, betting that Saturday’s federal budget will contain measures to spur investment in infrastructure.

A custom Bloomberg index of nine roadbuilders is up 8.1% this month, versus the 0.7% drop in the main S&P BSE Sensex index. The gauge includes IRB Infrastructure Developers Ltd., Sadbhav Engineering Ltd. and KNR Constructions Ltd., some of which struggled in 2019 as national elections caused the government to defer spending.

The rally is being led by belief that Finance Minister Nirmala Sitharaman will need to do more to revive economic growth from the lowest since 2008. She outlined $1.5 trillion in infrastructure investment last month, of which federal and state governments will contribute at least 75%.

“Last year the budget was very pro-farmer and there was not much for the infrastructure sector,” said Ankita Shah, a Mumbai-based analyst at Elara Securities India Pvt. “The sector has started to pick up only recently with the expectation that with the National Infrastructure Pipeline in place, there could be proper visibility on funding in the budget.”

India’s road sector has been facing headwinds after the National Highways Authority of India slowed its pace of awarding contracts due to a pile up of debt and delays in land acquisition. India awarded 3,211 kilometers of contracts in the first eight months of the financial year, just a third of its 10,000 kilometer full-year target, official data show.

Even so, the order pipeline from the NHAI is robust at 700 billion rupees ($14 billion), indicating that awarding will pick up pace in the current quarter, Alok Deora, an analyst at Yes Securities Ltd., wrote earlier this month. Around 2,000 kilometer of road projects are up for grabs, with another 6,000 kilometer coming up in the year starting April 1, according to Deora.

Brickwork Ratings predicts policy makers will opt to widen the budget deficit and raise spending on infrastructure by about 30% for the year starting 1 April.

Roadbuilders are also improving their finances by cutting debt. Sadbhav Engineering sold nine road assets to Indinfravit Trust last year. KNR Construction sold its Walayar road project to Singapore-based Cube Highways & Infrastructure Pte. in January.

To be sure, there’s risk of some “mean reversion” in their share prices if the budget doesn’t live up to expectations, said Parikshit Kandpal, an analyst at HDFC Securities Ltd.

Here’s what analysts are saying:

Elara Securities (Shah)

  • Positive on Sadbhav, PNC Infratech Ltd., KNR Construction and Ashoka Buildcon Ltd., which have benefited from recent asset sales.
  • Flags NCC Ltd. as a high beta stock, which means it can react sharply to both positive and negative news in the budget.
    HDFC Securities (Kandpal)
  • PNC, Ashoka Buildcon and KNR Construction should benefit from robust order books and good track record in executing projects, which helps them get bank funding.
  • Capital goods-related stocks like Larsen & Toubro Ltd., Siemens Ltd. would rally once private investment revives.
    Emkay (Sunil Tirumalai)
  • Budget allocation to roads could rise 14%, based on the pipeline Sitharaman outlined, which may benefit Sadbhav, PNC, KNR Construction, Ashoka Buildcon, and IRB Infrastructure.
  • Need to see a big jump in federal budget allocation if Finance Minister’s plan is to hold credibility.-Bloomberg

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1 Comment Share Your Views


  1. Like that famous Lucknow airport for Kumb, these newly built roads must not end up in in Lucknow. It should be more productive.


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