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Infrastructure companies are increasingly diversifying their order books amid a slowdown in road project ordering, with competition intensifying and margin pressures rising in the sector, according to a report by PhillipCapital.
The report highlighted that net order inflow in the third quarter of FY26 rose marginally by 2.8 per cent year-on-year and 15.4 per cent quarter-on-quarter to Rs 425 billion. Including L1 and new orders, the total order inflow during the quarter stood at Rs 694 billion. However, road ordering activity, particularly from the National Highways Authority of India (NHAI), has remained subdued in the third quarter of FY26. It stated, "Significant slowdown in road orders, diversification remains key... Most EPC players are following the strategy of diversifying". The report noted that NHAI awarded only 377 kilometres of road projects during the quarter and 712 kilometres in the first nine months of FY26. This is significantly lower compared to the average annual ordering of around 5,500 kilometres recorded between FY21 and FY23. The report added that NHAI has plans to award 124 road projects covering 6,376 kilometres with an estimated project cost of Rs 3.45 trillion. These include 84 Hybrid Annuity Model (HAM) projects, 28 Engineering, Procurement and Construction (EPC) projects and 12 Build-Operate-Transfer (BOT) projects. Out of the total planned projects, those worth Rs 1.5 trillion have already been approved. However, these projects have not moved to the awarding stage due to repeated bid extensions caused by delays in securing necessary approvals and issues related to land acquisition. PhillipCapital said that aggressive bidding by EPC and HAM players along with lower ordering by NHAI is a key concern for the road segment in the medium term. In response to these challenges, infrastructure companies that were traditionally focused on road projects are now targeting 30-40 per cent of their order books from non-road segments. The report noted that most EPC players are adopting a diversification strategy and expanding into sectors such as mining, railways, metro, urban infrastructure, hydro projects, tunnelling, renewable energy including battery storage, data centres and transmission projects to balance their portfolios. PhillipCapital maintained a cautious outlook on the sector in the short term, citing rising competition in the road segment along with margin pressures and execution challenges. However, the report added that companies with relatively strong balance sheets will be better positioned to withstand short-term sector headwinds. (ANI)
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