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India's Infra Sector Sees 4% Contraction in Q3 Amid Execution Woes

The infrastructure sector in India contracted by 4% year-on-year in the third quarter of FY26, according to a report by Nuvama Research. This weakness was driven by a shrinking executable order book, payment delays, elongated monsoons, and construction bans, particularly in the NCR. While the FY27 Union Budget promises higher allocation, the report maintains a cautious outlook due to persistent execution challenges. Sectors like railway wagon manufacturing and road EPC companies were among the hardest hit during the quarter.

Key Points: India's Infrastructure Sector Contracts 4% in Q3: Nuvama

  • 4% YoY revenue contraction for top firms
  • Profitability margins declined ~40 bps
  • Railway wagon makers saw 16% revenue drop
  • Road EPC firms faced sharper 7% decline
2 min read

Infra sector outlook cautious as weak Q3 performance leads to 4% YoY contraction: Nuvama Research

Nuvama Research reports a 4% YoY contraction in India's infra sector for Q3 FY26 due to payment delays, monsoon, and construction bans.

"Weakness continues in Q3FY26... led to a 4 per cent YoY contraction - Nuvama Research Report"

New Delhi, February 20

The infrastructure sector outlook in the country remains cautious after weak performance in the third quarter of FY26, which led to a contraction in growth, according to a report by Nuvama Research.

The report highlighted that weakness continued during the quarter due to multiple challenges, including eroding executable order books, payment issues, elongated monsoons, and construction bans, which impacted project execution and revenue growth.

It stated, "Weakness continues in Q3FY26. Eroding executable order book, payment issues, elongated monsoons and construction bans led to a 4 per cent YoY contraction... While the FY27 Budget has promised higher allocation, we remain cautious on the overall infra space".

According to the report, the aggregate top line of the top-14 listed infrastructure companies contracted 4 per cent year-on-year in the third quarter of FY26. Profitability also declined during the quarter, with the average EBITDA margin and adjusted profit after tax (PAT) margin falling around 40 basis points year-on-year to 10.1 per cent and 5.2 per cent, respectively.

The report noted that most engineering, procurement, and construction (EPC) companies have lowered their revenue and margin guidance for FY26, reflecting continued uncertainty in the sector.

The railway segment also faced challenges during the quarter. Wagon manufacturers reported a decline in revenue, with top line decreasing 16 per cent year-on-year and 3 per cent quarter-on-quarter, mainly due to the resurfacing of wheelset availability issues.

The decline was attributed to a shrinking executable order book, ongoing payment delays, prolonged monsoon conditions, and construction bans in the National Capital Region (NCR), which affected project activity.

Within the sector, road EPC companies witnessed a sharper decline, with their top line falling 7 per cent year-on-year. However, the overall decline in the sector was partially offset by better performance from building construction companies and NBCC.

While the Union Budget for FY27 has promised higher allocation towards infrastructure development, the report maintained a cautious outlook on the sector due to ongoing execution challenges and operational constraints.

Overall, the report outlined that the infrastructure sector continues to face near-term pressure on growth and profitability, despite improved order inflows and higher government allocation plans, with execution challenges remaining a key concern.

- ANI

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Reader Comments

P
Priya S
Payment delays are a cancer in the construction sector. My cousin works for a mid-sized EPC firm, and they haven't received payments for completed work for over 8 months. How can companies invest in new projects or even pay salaries? The budget promise needs to translate into actual fund flow on the ground. 💰
R
Rohit P
The railway segment decline is worrying. We are talking about 'Make in India' and boosting manufacturing, but if basic components like wheelsets are not available, how will we progress? This points to deeper supply chain issues that need urgent attention.
S
Sarah B
While the report is cautious, I see a silver lining. The building construction segment and NBCC performed better. Maybe the focus is shifting? Also, a 4% YoY contraction in a tough quarter with so many headwinds doesn't seem catastrophic. The sector has resilience.
V
Vikram M
As someone who tracks the stock market, this explains the underperformance of infra stocks. EPC companies lowering guidance is a big red flag for investors. The government's infra push is great for the long-term vision, but quarterly execution woes hurt market sentiment. Hope FY27 sees a turnaround.
K
Kavya N
Construction bans for pollution control are necessary for public health, but they create a huge economic cost. We need a balanced approach. Can we not promote and mandate cleaner construction technologies faster? This stop-start cycle helps no one. 🌱

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