Development of the country’s infrastructure, being at the forefront of the new government’s agenda, naturally sparked investor interest in the sector’s stocks. Last year’s Budget aimed at addressing the sector’s primary concern of adequate funding, besides upping targets for ports and road development.

But companies in the space are still grappling with executing even existing projects. New project awarding is yet to gather the desired pace. The effects of easier fund-raising will take a few quarters more to make a discernible impact. Given the positives jostling with a host of negatives, stocks of companies engaged in the roads transport sector have been a mixed bag since the previous budget in July last year.

For the seven companies that are almost exclusively engaged in road and highways, interest costs jumped 26 per cent for the fist nine months of the year even as revenues grew a lower 9 per cent. Interest ate away almost 18 per cent of their sales.

Stocks of MBL Infra, Sadbhav Engineering, and KNR Construction gained between 46 and 64 per cent since the previous budget. A good project mix, steady execution, and a healthy order book helped strong revenue growth, though net profit growth did not keep up.

But biggie IRB Infrastructure Developers picked up only in the recent December quarter after toll tariff revisions and strong traffic growth in key projects compensated for a sluggish first half.

IL&FS Transportation Networks, too, posted slow sales growth on delayed execution in key projects. Both stocks have been flat.

Expanding the universe to include diversified infrastructure companies such as GMR, Larsen & Toubro, IVRCL and the like, the picture is far worse.

With falling interest rates, the proposed PPP models, and moves to reduce execution period, the roads sector can eventually pick up over the course of the year.

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