Yet analysts remain upbeat on the stock, thanks to its diversification into non-road segments and readiness to benefit from a rebound in project awards by the National Highways Authority of India (NHAI).
In a 22 August report, credit rating agency ICRA Ltd said HG Infra’s credit profile would benefit from greater diversification, though profitability could moderate due to a changing segment mix. It added that incremental capex and investments are expected to be funded in a manner that keeps leverage low and debt metrics comfortable in the near to medium term.
The engineering, procurement, and construction (EPC) services provider has guided for ₹11,000 crore in order inflows and expects ₹7,000 crore in revenue with an Ebitda margin of 15-16% in 2025-26. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.
A wrench in the works
It is not just HG Infra but the entire road infrastructure sector is slowing, with the road ministry’s tightening of bidding norms for hybrid annuity model (HAM) projects bringing new awards to a crawl, said analysts. Shares of Dilip Buildcon, PNC Infratech, Ramky Infrastructure, G R Infraprojects, Afcons Infrastructure, Ircon International, NCC, Irb Infrastructure Developers, and KNR Constructions are down 24% to 86% from their 52-week highs.
Under HAM, the government contributes 40% of the project cost upfront as a construction grant, while the developer finances the remaining 60% and operates the project.
The highways bid pipeline improved to ₹68,300 crore in August 2025 from ₹66,400 crore in July. Of this, the National Highways Authority of India’s (NHAI’s) share was ₹57,200 crore. The authority has also shortlisted 124 projects covering 6,378km, with a total capital cost of ₹3.45 trillion (including land) and an estimated EPC cost of about ₹2 trillion, to be awarded in 2025-26, according to JM Financial’s August report.
The brokerage firm expects highway awarding to improve by November or December 2025, with a sharp boost likely in the March quarter.
The NHAI built 5,614 kilometres of highways in 2024-25—9% above its 5,150-km target but below the 6,644 km constructed in 2023-24, according to the report.
Project execution has also been hampered by labour shortages and the early monsoon, according to analysts.
The road less travelled
However, road infrastructure firms are taking the slowdown as a cue to diversify into railways, solar, power, and water.
Order awarding in the road sector has been subdued for the past two years, weighing on HG Infra’s order book, which stands at ₹14,700 crore—2.2X its trailing 12-month revenues. Of this, ₹3,100 crore is still awaiting an appointed date, according to a 16-August ICICI Securities report.
The brokerage noted that to offset the slowdown, the company has entered the solar and BESS segments, securing orders worth ₹5,000 crore.
“However, with no execution track record in these areas and high competition from entrenched players, risks to execution and margins have increased,” the report highlighted. ICICI Securities downgraded its rating on the stock to ‘hold’ from ‘add’ with a revised target price of ₹1,000 apiece.
ICRA highlighted that around 80% of its order book faces execution risk—with ~40% still in early stages (less than 20% progress) and another 40% yet to commence, as of 30 June 2025.
With its entry into new segments like solar energy production (EPC plus 25-year O&M), BESS (EPC plus 12-year O&M), and power transmission, the company also remains exposed to risks around land acquisition, battery sourcing, forex volatility, technology obsolescence, and operating performance of installed equipment.
Route to success
That said, “if fresh bidding picks up, the road infrastructure space could see a re-rating and HG Infra would be among the key beneficiaries”, said Parikshit Kandpal, research analyst at brokerage firm HDFC Securities.
Though HG Infra started diversifying its order book, a large chunk of its revenue still comes from road projects, primarily from the NHAI, which explains the stock’s underperformance compared to peers. On the brighter side, it has already monetized part of its HAM portfolio, he explained.
Highways account for 65% of its order book, followed by railways at 19.8%, solar at 11%, and battery energy storage systems (BESS) at 3.4%. In terms of business mix, EPC contributes 63.6%, while HAM makes up 36.4%, Kandpal explained.
He believes the stock appears attractive at current levels, prompting him to maintain a ‘buy’ call with a 12-month target price of ₹1,987 apiece. The stock is trading at ₹996.35 apiece, up 0.4% on National Stock Exchange on Tuesday.
“If earnings growth fails to materialize amid weak ordering, valuations could quickly lose their sheen,” he cautioned. The stock is currently trading at a price-to-earnings multiple of 15X, according to the stock market data platform Capitaline.
In the near term, key triggers for the stock include fresh order wins, steady execution progress, timely payment realizations, and potential HAM monetization.
