Construction sector set for rebound; Ambit bets on GR Infra, PNC Infra

Within the sector, Ambit said its framework favours GR Infraprojects, citing superior diversification, large scale, and a strong executable order book

"Poised for a cyclical rebound," India's road construction sector is moving out of a trough marked by slow tendering and intense competition into a recovery phase led by structural reforms, according to Ambit Institutional Equities.

 

Ambit said the upcycle is being driven by two key catalysts: front-loading of pre-construction activities to improve project readiness, and a sharply deleveraged National Highways Authority of India (NHAI) balance sheet. 

 

NHAI’s debt-to-equity ratio has fallen from about 50 per cent in FY22 to around 20 per cent in FY25, creating fiscal headroom to support a ₹8.3 trillion project pipeline over FY26 to FY28, analysts said in a report. 

 

The brokerage highlighted that systemic reforms are underway to improve industry efficiency. Along with the multi-year pipeline, accumulated live tenders of ₹1.9 trillion and a 10,000 km awarding target for FY26 are seen as leading indicators of a pickup in activity from the fourth quarter.

 

Ambit noted that Covid-era relaxations had dismantled entry barriers, leading to a surge in bidder participation and aggressive pricing, with peak participation rising to 15-20 players per project. 

 

While competition is expected to remain elevated in the FY2026 due to order hunger, amendments in technical and financial qualification norms, and a shift towards larger BOT-Toll projects, should reduce average participation to a more sustainable 8-10 players in the medium term, effectively crowding out smaller contractors, the report said.   Check Q3 Results today

Which stock to bet on?

Within the sector, Ambit said its framework favours GR Infraprojects, citing superior diversification, large scale, a strong executable order book of about 2.7 times revenue and lean working capital of 47 days. 

 

PNC Infratech was ranked as a runner-up, supported by a resilient balance sheet with net debt-to-equity of around 9 per cent and stable Ebitda margins of about 16 per cent. However, execution risks in the water segment, which accounts for about 17 per cent of PNC’s order book, and a longer working capital cycle of 73 days justify a valuation discount to GR Infraprojects, Ambit said.

 

KNR Constructions was rated 'Sell', with the brokerage flagging weak diversification, subdued revenue visibility and stressed working capital of 181 days. Despite its legacy strengths, Ambit said KNR falls short on key operational benchmarks in the current cycle.

 

Ambit’s stock preference remains GR Infraprojects (target price: ₹1,324) over PNC Infratech (target price: ₹309), both rated 'Buy', while maintaining a 'Sell' stance on KNR Constructions (target price: ₹146).  ========== 

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