Infra Sector Outlook Cautious as Weak Q3 Performance Leads to 4% YoY Contraction: Nuvama Research

Why It Matters

The slowdown signals tighter profit margins and heightened execution risk, challenging investors and policymakers aiming to accelerate India's infrastructure development.

Key Takeaways

• Q3 FY26 infra revenue fell 4% YoY.
• EBITDA margin dropped 40 bps to 10.1%.
• EPC firms cut FY26 guidance amid execution risks.
• Railway wagon sales down 16% YoY, 3% QoQ.
• FY27 budget boost insufficient to offset near‑term challenges.

Pulse Analysis

The third quarter of FY26 revealed a sobering picture for India's infrastructure landscape. Revenue across the top‑14 listed players shrank by 4% year‑on‑year, while profitability eroded as EBITDA margins slipped 40 basis points to just over 10%. The decline was not uniform; payment bottlenecks, a protracted monsoon season, and regional construction bans throttled project execution, leaving the executable order book depleted. These headwinds have forced many engineering, procurement and construction (EPC) firms to revise down their FY26 outlook, underscoring the sector’s vulnerability to macro‑operational shocks.

Segment‑level analysis shows divergent trends. Road EPC companies recorded a 7% top‑line drop, whereas building‑construction firms and NBCC managed to cushion the overall decline with relatively stronger performance. The railway segment, particularly wagon manufacturers, suffered a steep 16% revenue fall, compounded by wheel‑set shortages and lingering payment delays. Such mixed results highlight that while certain niches can weather adverse conditions, the broader sector remains constrained by cash‑flow stresses and execution bottlenecks, prompting a cautious stance from analysts and investors alike.

Looking ahead, the FY27 Union Budget pledges increased capital infusion for infrastructure projects, aiming to revitalize growth. However, analysts caution that fiscal stimulus alone may not resolve deep‑seated execution challenges. Stakeholders will be watching for improvements in order‑book quality, payment discipline, and regulatory clarity around construction bans. Until these operational issues are mitigated, the sector’s recovery is likely to be incremental, making prudent capital allocation and risk assessment essential for market participants.

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

By ANI · Last Updated: Feb 20, 2026, 09:07:00 AM IST

New Delhi – The infrastructure sector outlook in India remains cautious after weak performance in the third quarter of FY 26, 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.

“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 Q3 FY 26. 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 FY 26, 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 wheel‑set 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 FY 27 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.