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Infra: Road awarding to pick up gradually; decent opportunity in building space

ICICIdirect Research 04 Jul 2025 DISCLAIMER

Over the last 2 years, NHAI and MoRTH along with a focus on monetisation. They monetised assets worth Rs. 28,724 crore in FY25 and plans Rs 30,000 crore from monetising road assets in FY26). This was largely done to cut NHAI debt (at Rs. 2.44 lakh crore in FY25 vs. Rs. 3.35 lakh crore in FY24). We also saw that Ministry of Road Transport and Highways (MoRTH) is focusing on more of HAM and BOT awarding (rather than EPC). This has led to slower awarding trajectory as the ministry forms the new guidelines for BOT. Consequently, Road project awarding remained tepid for a second year in a row in FY25 with awarding of less than 5000 km vs. 8581 km in FY24 by MoRTH. In terms of construction, FY25 saw muted construction of 10421 km (vs. 12349 km in FY24).

Going ahead, we expect road awarding to pick up gradually as indicated by various key construction players. We highlight that most of these companies are at relatively strong balance sheets, despite stagnant awarding/revenue period. In this context, our preferred picks in road space include PNC Infra (TP ₹ 360, 18% upside) - (strong balance sheet with over Rs. 3000 crore of cash post asset sale and strong execution record) and HG Infra (TP ₹ 1340, 26% upside) - (Strong balance sheet and diversified order book of Rs. 15280 crore, 2.5x book to bill).

⁠In this context, we also believe that pure buildings focus is also an interesting play in the construction space. We are positive on PSP Projects (TP 950, 21% upside). It is a beneficiary of Adani’s co ownership and looking at Rs. 10000 crore order opportunity from the group over next 2 years. Another pick is Ahluwalia Contracts (TP ₹ 1110, 13% upside) with healthy order book at Rs. 15775 crore (3.8x book to bill) and debt free balance sheet, focused on buildings, which has seen good growth amid real estate/hotels/hospitals upcycle.

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