Weak execution, order momentum for infrastructure firms in Q2FY27

Monsoon disruptions, higher input costs and geopolitical tensions weigh on infrastructure firms' Q2FY27 performance, though strong order books provide revenue visibility

Trends across the infrastructure space in Q2FY27 appear to be seasonally weak due to the monsoon, with additional challenges arising from geopolitical tensions. Raw material costs are up, and companies with West Asia exposure have additional concerns due to slowdowns and disruptions.

 

The monsoon always slows project execution, but the additional challenges may have had more of an impact on civil work. Revenue growth rates may soften quarter-on-quarter (Q-o-Q), while earnings before interest, tax, depreciation and amortisation (Ebitda) margins are likely to be stable year-on-year (Y-o-Y) at best. The continued policy focus on infrastructure and budgetary allocations supports the outlook, but Q2FY27 activity in roads and construction may be low-key. Bulging order books do give revenue visibility, and there is tender activity across power, transmission, metros, urban infrastructure and data centres.

 

In August, NHAI awarded eight road projects, but construction fell 12 per cent Y-o-Y. NHAI plans to award road projects spanning 5,200 kilometres (km), up 66 per cent Y-o-Y, in FY27 while constructing 4,950 km, down 7 per cent Y-o-Y. It missed the awarding target of 4,500 km for FY26. 

 

In FY27 year-to-date, awards stand at 329 km, up 69 per cent Y-o-Y. NHAI awarded 3,124 km in FY26. No increase in the budgeted outlay for NHAI in the FY27 Budget leads to concerns since it will need to monetise assets in a big way to avoid debt growth. Year-to-date (YTD) FY27 road construction, at 1,053 km, is down 24 per cent Y-o-Y.

 

Order inflows across roads, rail and construction, as announced on the BSE, were ₹22,100 crore (versus ₹74,700 crore in Q2FY26 and ₹57,200 crore in Q1FY27). Transmission and distribution (T&D) players (KEC, Kalpataru) and diversified players (Afcons, NCC, Dilip Buildcon, J Kumar Infra) provided the bulk of Q2FY27 inflows. For many players, H1FY27 inflows are well below FY27 guidance, implying that a sharp increase in orders in H2 will be needed to meet FY27 guidance. Ebitda margins are likely to compress.

 

Road engineering, procurement and construction (EPC) inflows were just ₹3,100 crore (versus ₹11,100 crore Y-o-Y), with only Ceigall (₹1,800 crore) and Ashoka Buildcon (₹700 crore) securing significant orders. Construction EPC inflows were ₹1,200 crore, entirely from Capacite. Ahluwalia had no announced orders. Orders from diversified players included Afcons (₹2,800 crore), NCC (₹3,100 crore), Dilip Buildcon (₹2,000 crore) and J Kumar (₹1,000 crore). T&D contractors were led by KEC and Kalpataru. In railways, RVNL secured orders worth ₹1,800 crore. NCC's order book of ₹71,300 crore shows multi-year revenue visibility.

 

Among EPC players (excluding L&T), CemIndia Projects could show Y-o-Y revenue growth in the late teens, with execution picking up as delays in the Vadhavan Port project and other monsoon-related disruptions ease. Ebitda could grow Y-o-Y by nearly 30 per cent, with stable Ebitda margins of 10 per cent maintained. Q2FY27 profit after tax (PAT) could grow by 25 per cent Y-o-Y. Order inflows are expected to be strong, with ₹1,240 crore secured in July 2026, a ₹1,000 crore pipeline in L1 status and a longer-term pipeline of ₹90,000 crore. The FY27 inflow target is ₹25,000 crore. Guidance and progress on a proposed qualified institutional placement (QIP) would be keenly watched.

 

Power Mech Projects is another potential outperformer, with likely revenue growth above 20 per cent, supported by activity in the mine development and operation segment. Ebitda should also grow by nearly 20 per cent, with margins improving Q-o-Q. The company has secured orders of ₹3,700 crore in H1FY27, which is 31 per cent of its ₹12,000 crore guidance for FY27.

 

PSP Projects (PSPPL) may see revenue growth of 30 per cent Y-o-Y on better execution, aided by improved labour availability and progress on projects like the Dharavi redevelopment. Q2FY27 Ebitda is expected to improve Q-o-Q. Order inflows are driven by a bid pipeline, the bulk of which consists of Adani Group projects. The FY27 order inflow guidance target is ₹6,000 crore. The order book is already around ₹13,250 crore, which provides good revenue visibility.

 

VA Tech Wabag (VTW) should also see Q2FY27 revenue growth of nearly 20 per cent Y-o-Y, with execution gaining traction in its international EPC portfolio. Ebitda could grow by the mid-teens, with Ebitda margins more or less stable. Order inflows in Q1 were ₹3,430 crore, with 75 per cent from overseas orders, leading to an order book of ₹19,400 crore. Q2 may also see strong order inflows, but West Asia is a key region for large desalination opportunities, and the turmoil there could be a drag.

 

J Kumar Infraprojects (JKIL) will probably see revenue growth in the low double digits as execution has improved. Ebitda may grow in single digits, with more or less stable margins. The company's FY27 inflow target is ₹10,000 crore, with an outstanding order book of ₹22,250 crore, which provides strong revenue visibility. The pipeline is over ₹50,000 crore across MSRDC, MMRDA, NHAI, metro rail and flyovers. Management commentary on the pace of execution is a key monitorable.  

The writer is a New Delhi-based independent journalist.