When you read the word infrastructure, what comes to your mind? Examples include skyscrapers, large bridges, aeroplanes landing in the distance, etc. However, infrastructure is so much more than we believe,
Infrastructure development involves building everything to raise the standard of living and ease of conducting economic activities. In this article, we will look at this industry and the top infra stocks in India you can add to your portfolio.
Infrastructure at a glance
Development and investment in infrastructure are the most productive use of tax money. A country that consistently develops its infrastructure attracts growth. The cities with the best infrastructure attract qualified workers and investment from all over the world.
When a country is in an emerging market category, its infrastructure growth is at its peak. India falls into this category. Infrastructure investments from the government were at ₹11.11 lakh crore in the interim budget 2024 -25.
Infrastructure does not mean building tall buildings, it involves a wide range of projects such as electricity generation and transmission, water supply systems, schools, hospitals, factories, malls, railways, ports, etc, to name a few. Such projects are initiated with a twin objective of raising the living standards and increasing the ease of doing business.
Why Indian infrastructure sector is in a sweet spot
The Indian administration is aware that a robust infrastructure apparatus is the only way to progress from an emerging country to a developed one. The national infrastructure pipeline has over 1.3 trillion dollars of projects underway as of financial year 24.
Also read: PM Narendra Modi launches historic infrastructure projects worth ₹1 lakh crore
India also enjoys favourable demographics. According to a report by the World Bank, more than 40% of the Indian population will be living in urban areas by 2036. This would mean a very high demand for infrastructure going forward.
With the rise in incomes, government support, and the rise in GDP, there is a new chapter of demand being unravelled in India. This self-reinforcing cycle of economic growth is what attracts foreign investors to India. MNCs are opening their offices in India because they clearly understand how profitable this environment is. For this reason, India has seen an FDI inflow of 690 billion dollars in the past 10 years.
For generations to come, the seeds of this original infrastructure investment will continue to grow. The current investment boom is generating earnings, jobs, and other revenue streams. When incomes rise people want better living conditions and businesses want a better business environment. That leads to more demand for infrastructure and so on. This cycle keeps going for hundreds of years as can be seen in the developed Western society. India is on the same growth path.
To benefit from this upcoming mania of investment and growth, let us look at how we can participate. Let us look at some of the top infra stocks to ride this wave.
Best Infrastructure companies:
Here is a list of best 5 infra stocks in India by market capitalization as on November 21, 2024:
- Larsen & Toubro: Larsen & Toubro (LT) is engaged in many businesses that include engineering and construction of big projects such as power plants, heavy infrastructure, aerospace, defence, etc. This company has an order book of a staggering ₹5,104 billion as of the second quarter of FY25. LT contributed to India’s most iconic projects like the Statue of Unity, Ram temple in Ayodhya, Delhi Metro, etc.
- Rail Vikas Nigam ltd: RVNL is a public sector enterprise mainly involved with the development and modernization of railway infrastructure in India. The company commands a respectable position in top infra stocks as it has been building the Indian railways since 2003, which has been the backbone of Indian economic development. The government allocated $31.67bn for railway infrastructure in the interim budget 2024- 25.
Also read: 1853 to 2023: A case study on Indian railways, its birth and growth
- IRB Infra: IRB infra is primarily involved in the development of roads and highways in India. This company has a road and highway portfolio of 15,444kms and it has 10% participation in the entire toll collection of India as of Q2FY25. In the same quarter, its order book stands at over ₹2 trillion.
- KEC International: KEC is an infrastructure company involved in almost all business verticals ranging from commercial buildings to laying railway tracks. The company has an order pipeline of ₹34,088 crore as of the second quarter of FY25, out of which 55% is in the power sector. The company has a footprint in 110+ countries.
- NBCC: Since 1960, NBCC, a PSU, has been engaged in engineering, project management, and real estate development. In the second quarter of FY2025, 93% of their revenue came from project management. As of Q2FY2025, the company’s order book is valued at ₹70,000 cr.
Financial performance for the aforementioned companies in FY2024:
| Fundamental metrics (In ₹ Cr) | Larsen & Toubro | RVNL | IRB Infra | KEC Intl. | NBCC |
| Market Capitalisation | 4,79,598 | 88,040 | 27,653 | 26,364 | 23,817 |
| Sales | 2,21,113 | 21,733 | 7,409 | 19.914 | 10,433 |
| Expenses | 1,91,248 | 20,386 | 4,387 | 18,561 | 9,916 |
| Profit before tax | 20,517 | 1,939 | 951 | 426 | 559 |
| Net profit | 15,547 | 1,463 | 606 | 347 | 414 |
| RoE (%) | 14.7% | 20.4% | 4.38% | 8.8% | 24.8% |
Understand this before investing in infra space
Infrastructure projects take years to complete so it is common sense that return on infra stocks will also take a few years. Always remember any investment in this space is a long-term investment.
This sector faces many challenges in the short term like cash crunch, project delays, etc which may last for a few months or years but these are just small hurdles in the grander scheme of things. Returns in such sectors pile up slowly.
Also read: The role of compound interest to reach your financial goals
Bottomline
Deciding to ride the Indian infrastructure wave might be a good idea for your portfolio. Infra is going to be profitable only if you choose the right investments. Searching for the right investments requires patience and thorough research. Historic performance does not guarantee future returns. Research well and choose your stocks wisely.
FAQs
1 – Which is the biggest infrastructure company in India
Larsen and Toubro is the largest infra company in market cap terms. As of November 21, 2024, it has a market cap of ₹4,79,598 crore. The highest revenue and net profit among all the Indian infrastructure companies as of Q2 of the current financial year.
2 – Which is the biggest infra company in the world?
Union Pacific Corporation, a US-based railroad builder, is the biggest infrastructure company in the world with a ₹11.9 trillion market cap, the company operates 51,600 km of railway lines.
3 – Which Indian infra company gives the highest dividend?
As of second quarter of financial year 2025, Engineers India limited has the highest dividend yield. It gives a dividend yield of 1.68%.
4 – Name the top 5 infrastructure companies to invest in 2025.
You can consider businesses with large order books and strong cash flows for potential consistency. These companies also usually command the highest market capitalization. Considering these aspects you can consider L&T, RVNL, IRB infra, KEC international, and NBCC with the highest market cap as of November 21, 2024.
5 – Which is the best infrastructure company to invest in for the long term ?
L&T can be considered if you want to invest your money for the long term in the infrastructure space. This company has the highest market cap as of November 21,2024. The company also has a good order book (as of Q2FY25) as compared to any infra or engineering company.
