That’s the amount that Union minister Nitin Gadkari has said will be spent this year on roads and highway projects. That’s an incredible $58 billion (bn). It’s double the recent annual average.
With the government committed to infrastructure creation, the roads and highway sector will remain a growth driver of the Indian economy.
India’s highway network has massively improved over the years. In recent years, the pace of construction has noticeably improved.
Companies building roads and highways in India have benefitted a lot over the last ten years due to the flood of government projects, improved bidding processes, and reforms in the sector.
And the momentum is expected to pick up now.
This will result in a lot of interest on Dalal Street as far as these stocks are concerned.
So, which ones should you have on your watchlist?
In this editorial, we will look at three stocks likely to benefit from increased government spending.
IRB Infrastructure Developers (IRB)
It is a well-established company in India’s infrastructure sector. It’s the country’s largest highway operator.
The company has, over the years, built a strong reputation and has many firsts to its name.
IRB was the first infrastructure company in India to execute a road project under the build-operate-transfer model, the first to operate and maintain an expressway, the first to launch an infrastructure investment trust (InvIT), and the first to raise funds from the offshore bond market.
In the March 2025 quarter, the company’s revenue was down 10.6% year-on-year. However, its net profit was up 13.7% year-on-year.
Also Read: InvITs becoming prime vehicle for forging M&A activity in roads and highways
In FY25, the company’s revenue grew marginally by 2.8% on-year. However, the net profit jumped multifold due to an exceptional gain during the year.
IRB’s InvIT generated ₹6,360 crore in toll revenue, a 23% on-year increase, with a 10% national market share.
The company’s current asset base stands at ₹80,000 crore across 12 states in India with a weighted average residual concession life of 21 years.
KNR Constructions
KNR is a leading Indian EPC firm. It has a pressence in roads, highways, irrigation, and urban water infrastructure.
The company is known for maintaining a healthy balance sheet and is capable of delivering on the projects in its order book on time.
Given the robust order pipeline that is on its way due to the government’s spending, the management is focused on expanding into new segments and markets to continue building its order book.
Over the years, the company has ventured into non-road segments such as metro and water projects to increase its addressable market.
In the March 2025 quarter, the company reported a drop in revenue and profits. Revenue fell 35% on-year, and the net profit fell by a significant 60.5% on-year.
Despite the short-term challenges, the company’s long-term outlook is positive. Its current order book is ₹5,050 crore, which provides sufficient visibility for FY26. The future order book for beyond FY26 should pick up soon due to the government’s upcoming spending binge.
Ashoka Buildcon
Ashoka Buildcon is one of the leading highway developers in India. The company also sells ready-mix concrete (RMC).
Although highways are the company’s core business, it has a diversified portfolio of projects. This is because the company is also involved in other projects, such as bridges, power plants, buildings, city gas distribution, and various smart city schemes.
The company has executed over 40 projects on a public-private partnership (PPP) basis and is present in over 20 states in the country.
Ashoka Buildcon has many signature projects to its name like the constructed Bundelkhand Expressway. It has constructed one of India’s longest six-lane flyovers, 12.7 kilometres, in Kerala. It also built India’s first eight-lane extra-dosed stayed bridge within 33 months.
In the March 2025 quarter, the company’s revenue increased 13%, but the net profit fell 31.7%.
The company has struggled to improve its margins and cash flows over the last few years. However, a turnaround in performance is possible if the company’s revenue grows sufficiently. The government’s renewed spending on roads and highways could be just what the company needs at this point.
Conclusion
Road and highway companies play a very important role in defining the growth and development of our country.
The continuation and enhancement of infrastructure investments by the government will undoubtedly provide a significant boost to these companies and the broader market.
However, investors should exercise caution while considering these stocks for investment.
These companies are largely dependent on government contracts, which can suffer from delays and have long payment cycles.
It’s crucial for investors to focus on execution capabilities and profitability. After all, it’s not just about winning contracts but delivering them efficiently and sustainably.
Investors should evaluate these companies fundamentals, corporate governance, and valuations of the stocks as key factors when conducting due diligence before making investment decisions.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com.
