L&T to KEC International: Diversified players better placed in infra sector

Diversified companies like L&T and KEC International expected to see strong revenue growth, while road companies face challenges due to lower order books and margin pressures in Q1FY26

In the first quarter of 2025-26 (Q1FY26), results across engineering procurement and construction (EPC) companies, and road and infrastructure segments may be mixed. Diversified companies like L&T, KPIL, KEC International, and Ahluwalia Contracts may report good results with double-digit revenue growth. But road companies like KNR Constructions, GR Infra, and Ashoka Buildcon face headwinds due to lower order books, and could see revenue declines. Asset monetisation continues for road players.

 

Order inflows have been robust for diversified companies but weak for road developers in Q1FY26. However, book-to-bill ratios remain adequate in the range of 2-4 times even for most road players (although FY25 has a low base in Q1FY25).

 

Operating profit margins are likely stable or may improve for diversified companies, but road companies will see margin pressures. Operating profit margins for KEC International may expand due to improved performance in the power vertical. Debt and working capital are likely to rise on a sequential basis in most cases due to seasonality. 

 

Ordering momentum was good across defence, power transmission & distribution (T&D), and renewables. Owing to the low base of last year when elections led to a stop in government tenders, tendering activity saw sharp growth year-on-year (Y-o-Y). Tendering activity grew by 150 per cent Y-o-Y to ₹3.2 trillion in Q1FY26 on a low base. But ordering declined by 30 per cent Y-o-Y to ₹1.8 trillion in Q1FY26 on high base mainly due to high awards from MSRDC in Q1FY25. 

 

The highways bid pipeline moderated to ₹66,400 crore in July 2025 from ₹69,100 crore in June 2025 (July 2024 at ₹1.13 trillion). The National Highways Authority of India’s (NHAI’s) bid pipeline stands at ₹52,600 crore, with hybrid annuity model, EPC, and build-operate-transfer (BOT) projects accounting for 39 per cent, 40 per cent, and 21 per cent share, respectively. The pipeline is expected to improve over the next two months.

 

The NHAI awarded new road projects spanning just 13 km in June 2025, versus 102 km in May 2025 (nil in Q1FY24). In FY25, it awarded a total 2,170 km (1,300 km in FY24). The awards’ value at ₹47,000 crore in FY25 (vs ₹35,000 crore in FY24) was much lower than ₹1.5 trillion in FY22 and ₹1.3 trillion in FY23. The pace of construction increased month-on-month (M-o-M) to 404 km in Jun 2025 against 375 km in May 2025 (248 km in June 2024).  ALSO READ: Tata Tech Q1 FY26 result: Profit rises 5.1%, revenue down marginally 

The biggest diversified player, L&T, is likely to see adjusted net profit growth of over 20 per cent Y-o-Y but new order announcements were estimated relatively low at around ₹15,000 crore in Q1FY26. L&T’s P&M (projects and manufacturing) order inflows are likely to see significant declines, and consolidated order inflows are also likely to fall. Revenue growth would be mid-to-high teens, with margins stable or expanding slightly, and operating profit growth would also be in mid-teens. Lower interest costs and higher other income could bump up net profit. During Q1FY26, L&T bagged orders in the power T&D segment, water, buildings, and factories. The Siemens consortium also won a major order worth ₹4,100 crore from the National High-Speed Rail Corporation for the Mumbai-Ahmedabad high-speed rail project. BHEL won ₹7,350 crore of orders, KEC International received ₹6,850 crore, and KPIL acquired ₹7,150 crore.

 

One reason why diversified EPC companies may see margin uptick is the completion of some low-margin projects. Also prices of some key inputs have eased. Non-ferrous metals like zinc, aluminium, and copper have seen prices easing in Q1FY26 versus the March 2025 levels. Export performance is improving, with expectations of growth in the US, Europe, and West Asia, where EPC players are benefiting from opportunities in renewables and renewable transmission.