PNC Infra, Ashoka Buildcon, IRB Other: Increase in competition can lead to a moderation in operating margins | Einsmark news

Construction supplies: Road construction majors as PNC Infratech Ltd, ASHOKA Buildcon, IRB Infrastructure Developers LTD, KNR Constructions LTD and others have seen their share price fall 10-36% so far in 2025. While the steep correction in the markets has also contributed to this decline, the battle competition is often seen as a concern at Margins. The order flows in FY25 to remain subdued due to the general election, and the assigned objects were on discounts to base prices. The ICRA ICRA ratings expected the construction industry to grow 8-10% in FY2026. However, they add that increasing competition will remain a good profitability of construction companies. Contractors focused on the roads that are on the income revenue, as the inflow of order takes a hit according to the ICRA system flow in the slow lane during FY25, the order inflow in the first nine months of FY25 remained gentle due to the June 2024 election, followed by the monsoon season where construction activities slim. Expectations remind that the order inflow will now improve in FY26. According to ICRA, construction operations in the first quarter FY2025, an extensive monsoon season, were greatly influenced by the Model Code of Conduction (MCC), and a switch to milestone-based billing in the Q2 FY2025, especially for the road projects. After seeing a muted 1.5% yoy during H1 FY2025, the performing rate gained momentum in the Q3 FY2025, which was also gained in the Q4 FY2025. Due to a subdued H1, the growth in the total order inflow or the sample of ICRA in FY2025 is estimated at a low 1-3%. In the first nine months of FY2025, the inflow of the new order was modest, mainly due to the impact of the general election, ICRA ratings said. Prospects for Chief Construction Main Pigs The contractors, which are largely focused on the road segment, are likely to underperform compared to broader trends due to the slowdown of the Mort/Nhai, according to Suprio Banerjee, Vice President and Co-Group Head, Corporate Judgment, ICRA. Several middle-sized road construction entities have an order book/income of less than 2.0 times, which is an indication of impending tension on their income prospects in FY2026. Diviversified players are expected, especially those focusing on urban infrastructure, renewable and water -related projects will perform relatively better in the current fiscal, Bannerjee added. Contracts awarded at significant discount sub-segments such as railways, road as well as urban infrastructure have reported a fierce competition over the past few years. The majority of road projects under the MORTH/NHAI were awarded at a considerable discount compared to the base price of the government. The competition for other sectors (subway, railways and water supply and sanitation) has also tightened, with new entrants to diversify their order book, according to ICRA. ICRA expects the operating margin of the players to remain within 10.5-11.0% for FY2025 and FY2026, supported by the relatively stable input prices and benefits for leverage. However, ICRA emphasizes that the operating margin gradually moderated from 13-14% levels in FY2021 as a result of increasing competition. First published: 18 Apr 2025, 03:03 IST