“3 Must-Watch Infrastructure Stocks Set to Surge Before Union Budget 2025!”
Infrastructure Stocks: The Indian government’s infrastructure spending has been a significant driver of growth in recent years. In the 2024-25 budget, a record Rs 11.1 trillion (tn) was allocated for infrastructure, continuing the trend from last year’s Rs 10 tn spend.
This focus on projects like rural roads and flood management underscores the government’s commitment to a more connected India.
The construction, cement, and steel sectors are expected to benefit greatly from these initiatives. Programs such as the Pradhan Mantri Gram Sadak Yojana and interest-free loans to states are set to boost momentum.
For investors, these ongoing initiatives present a promising opportunity. Infrastructure stocks are likely to experience pre-budget gains as the market anticipates further government support.
In this article, we highlight top infrastructure stocks that are poised to benefit from India’s expanding infrastructure plans.
#1 RITES
First on our list is RITES.
RITES, a central public sector undertaking within the Ministry of Railways, is well-known for its diverse expertise in engineering and consultancy.
The company offers a wide range of services covering the entire project lifecycle, from inception to completion, across various aspects of transportation infrastructure and associated technologies.
Recent order wins have strengthened RITES’ near-term revenue visibility. These include a Rs 4.1 bn contract for infrastructure development at IIT-Bhubaneswar, a Memorandum of Understanding to support North Eastern Electric Power Corporation (NEEPCO) with rail infrastructure projects, and a Rs 3.1 bn pact with CFM Mozambique for the supply of diesel locomotives.
These contribute to RITES’ robust order book position, which stood at a healthy Rs 54 bn as of the December 2023 quarter.
Importantly, nearly half of this order book comprises high-margin consultancy services, ensuring strong profitability.
Between 2020 and 2024, the company has seen a consistent 5-year Compound Annual Growth Rate (CAGR) of 2.7% in sales and 0.2% in net profit.
The return ratios have been impressive, with the company reporting a 5-year average Return on Capital Employed (RoCE) of 28.7% and Return on Equity (RoE) of 21%.
Looking forward, RITES aims for double-digit growth in its bottom line. The company is experiencing significant growth in the quality assurance sector, especially among non-Indian Railway clients.
RITES is actively pursuing international expansion, focusing on new markets with different railway gauges, particularly those using cape gauge.
Next on the list is ITD Cementation India.
ITD Cementation is a leading player in the construction and engineering industry, known for its expertise in executing large-scale projects in sectors like transportation, power, and industrial infrastructure.
As a subsidiary of Thailand-based Italian-Thai Development Public Company Limited, ITD Cementation has established itself as a specialist in handling complex infrastructure projects.
With the government increasing infrastructure spending, especially in transportation and urban development, ITD Cementation is poised to benefit significantly.
The company’s proficiency in specialized infrastructure projects, particularly in marine, metro, and urban sectors, positions it well to take advantage of India’s growing investments in ports, metro networks, and urban development.
With an order book valued at Rs 185.4 billion, ITD Cementation is heavily focused on marine and urban infrastructure projects. The company’s order book is diversified across governments, PSUs, and private sector clients, contributing 49%, 18%, and 33% respectively.
ITD Cementation has a strong presence in 13 Indian states and one union territory, with executing projects overseas in Sri Lanka and Bangladesh.
In FY24, the company secured fresh orders worth Rs 70 billion, including a Rs 12 billion marine terminal project in Gujarat and a Rs 9 billion metro station project in Mumbai. Between 2020 and 2024, ITD Cementation registered a solid 5-year CAGR of 19.5% in revenue and 27.4% in net profit, highlighting the company’s consistent growth trajectory. The company’s financials are robust, with an average RoCE of 22.5% and RoE of 8%.
Ahluwalia Contracts, third on our list, is a leading player in the construction industry, specializing in civil engineering and infrastructure projects across various sectors. Its clientele includes central and state governments, PSUs, renowned business houses, and real estate developers.
With an order book valued at approximately Rs 214.4 billion, Ahluwalia Contracts is expected to benefit from increased project tenders in the urban development and affordable housing sectors due to the government’s focus on infrastructure development in the upcoming budget. This makes it a stock to watch for pre-budget gains. The company’s growth is primarily fueled by its expertise in building construction projects.
Key victories in 2024 include a Rs 7 billion contract for a commercial complex in Mumbai and a Rs 5 billion residential development in Bangalore.
Furthermore, Ahluwalia Contracts has made significant progress in the data center sector, securing orders from prestigious clients such as Adani and Indian Financial Technologies.
In conclusion, as India prepares for its next phase of economic expansion, infrastructure continues to be the cornerstone of this evolution. The three companies mentioned above, with strong order books and strategic project wins, are well-positioned to capitalize on government spending and sectoral growth.
While a healthy order book indicates potential revenue and profit growth, it is essential to prioritize execution capabilities and profitability. Winning contracts is important, but delivering them efficiently and sustainably is equally crucial.
With the Union Budget 2025 approaching, these stocks could emerge as key beneficiaries of increased infrastructure investment. However, maintaining a balanced perspective and focusing on execution are vital for long-term success.
Investors should assess the fundamentals, corporate governance, and stock valuations of these companies as critical factors in their due diligence process before making investment decisions.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.