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Industry experts also foresee a stronger focus on improving rural road connectivity in this year’s budget
Roads & Highway construction stocks in focus (Image: Shutterstock)
The road construction sector is drawing significant attention ahead of the Union Budget scheduled for February 1, with expectations that it will be one of the key beneficiaries of increased budgetary allocations.
Experts point out that increased infrastructure spending, with a major focus on road network development, has been a defining feature of Union Budgets under PM Narendra Modi’s leadership. Over the past five years, India’s road network has grown by 59%, making it the second-largest globally at over 6.7 million kilometers, second only to the United States. This expansion includes 1.46 lakh kilometers of national highways.
Although there has been some slowdown in the past two years due to higher social expenditures in preparation for the general elections in May, analysts expect a significant year-on-year rise in road sector funding in the upcoming Union Budget.
In the 2024–25 fiscal year, the Ministry of Road Transport and Highways (MoRTH) was allocated Rs 2.72 lakh crore, with actual expenditure by December 2024 estimated at Rs 1.75–1.8 lakh crore. However, the pace of project awarding slowed to 2,500 kilometers, compared to 3,100 kilometers in the same period last year.
The Gross Budgetary Support (GBS) is expected to see a modest increase of 5–6%, reaching Rs 2.85–2.9 lakh crore.
A renewed focus on Build-Operate-Transfer (BOT) projects is anticipated, with 15 projects valued at Rs 44,000 crore in the pipeline. Additionally, the government is likely to revive the Bharatmala Pariyojana, aiming to complete the remaining 4,182 kilometers under Phase-I. Delays in this initiative have been attributed to cost overruns and administrative challenges. With the National Highways Authority of India (NHAI) carrying a debt of Rs 2.8 lakh crore, the budget may introduce measures to encourage asset monetisation to finance new developments and ease financial pressures.
Mandar Bhojane, Equity Research Analyst at Choice Broking, notes that while budgetary allocations for road infrastructure have increased, project execution may still face delays due to challenges such as land acquisition and regulatory hurdles. Infrastructure and EPC companies are expected to benefit, but near-term gains may be tempered by these execution challenges.
Industry experts also foresee a stronger focus on improving rural road connectivity in this year’s budget. However, the success of such initiatives will depend on project size, private developers’ returns, and the ability to streamline clearances to address the challenges associated with long-gestation projects.
Over the past 1–2 years, the road construction sector has consistently delivered strong returns, with companies like G R Infraprojects, KNR Constructions, PNC Infratech, and Dilip Buildcon registering compound annual growth rates (CAGRs) ranging from 15% to 30%. Analysts believe that valuations in this sector remain attractive compared to the railways sector, supported by steady revenue growth and substantial government spending.
