Infrastructure – Growth Slows as Q3 Challenges Weigh on Sector Outlook
Infrastructure – The country’s infrastructure industry is navigating a challenging phase after a muted performance in the third quarter of FY26, with growth slipping into negative territory, according to a recent assessment by Nuvama Research.
Third-Quarter Performance Reflects Execution Strain
The report points to a combination of operational and financial pressures that disrupted project timelines during the quarter. A reduction in executable order books, delays in payments, extended monsoon conditions and construction restrictions in certain regions all contributed to slower activity on the ground. As a result, overall revenue momentum weakened across several key players in the sector.
Data compiled from 14 leading listed infrastructure companies show that combined revenue declined by 4 percent compared with the same period last year. The contraction highlights the strain on execution capabilities at a time when project pipelines were expected to remain strong.
Margins Narrow Amid Cost Pressures
Beyond the drop in revenue, profitability metrics also softened. The average EBITDA margin across the companies under review edged down by around 40 basis points year-on-year to 10.1 percent. Adjusted profit after tax margins followed a similar trajectory, slipping to 5.2 percent.
Analysts suggest that delays in project execution and slower billing cycles affected operating leverage. Payment bottlenecks further compounded financial stress, limiting flexibility for contractors managing multiple large-scale assignments.
Revised Guidance Signals Caution
Engineering, procurement and construction companies have begun recalibrating expectations for the current financial year. Several firms have lowered their revenue growth and margin forecasts for FY26, reflecting persistent uncertainties tied to execution timelines and working capital management.
The reassessment indicates that companies are prioritizing balance sheet stability and risk management over aggressive expansion in the near term. Industry observers note that while order inflows have shown improvement in some segments, the ability to convert these into timely revenue remains uneven.
Railway and Road Segments Under Pressure
The railway-linked segment faced its own set of hurdles during the quarter. Wagon manufacturers reported a 16 percent year-on-year decline in revenue, alongside a 3 percent sequential dip. The setback has been largely attributed to recurring issues related to wheelset availability, which disrupted production schedules.
Road-focused EPC firms experienced a sharper revenue fall of 7 percent compared with a year earlier. Prolonged rains and construction restrictions, particularly in the National Capital Region, slowed on-site progress and affected billing cycles.
However, not all segments recorded a downturn. Building construction companies delivered relatively steadier numbers, helping cushion the broader sectoral impact. State-run NBCC also provided some support through stable performance in its project portfolio.
Budget Allocation Offers Long-Term Support
The Union Budget for FY27 has outlined higher allocations for infrastructure development, signaling continued government commitment to capital expenditure-led growth. Analysts acknowledge that increased public spending could create opportunities in transport, urban development and energy projects over the medium term.
Despite this policy backing, Nuvama Research maintains a guarded view on the near-term outlook. The report emphasizes that execution challenges, order book quality and payment cycles will remain key variables shaping performance in the coming quarters.
Near-Term Headwinds Persist
In summary, the infrastructure sector is confronting immediate pressures on both growth and profitability. While project awards and policy support offer structural positives, operational constraints have tempered momentum in FY26.
Industry participants are expected to focus on improving execution efficiency and strengthening cash flows to navigate the current phase. The pace at which these hurdles ease will determine whether the sector can regain stable growth in the upcoming financial year.