Feb 5, 2024
The latest infrastructure bill that was presented in the Union Budget 2024 has a lot of crazy things in it.
For a better perspective, this year’s document wasn’t that big given it was an interim budget. The usual budget presentation sometimes makes it impossible for people to read the entire thing.
Earlier this week, I sat down and tried to read some of the document. It was quite hilarious because even after reading some of the sections, the inevitable thing in each of them was suggesting a continuation to the infrastructure push.
Last year, the big talking point was the government’s massive infrastructure push. The Rs 10 trillion allocation was indeed a huge amount.
This time, the market wasn’t expecting a major increase in allocation. Still, the announcement of an 11.1% increase was significant. The government has signalled that even in an interim budget, it’s willing to remain committed to its infra push.
The long term impact would be a resurgence of India’s manufacturing and innovation. This won’t look similar to the industrial revolution of the past. It will instead be a technology-enabled effort that will usher in faster, more efficient, and more secure products and services.
With a growing population and aging assets, India is putting a lot of capital expenditure (capex) on both new projects and refurbishments.
Now most investors are already aware of the big behemoths of the industry like Larsen & Toubro, Siemens, and the likes. These companies have already found a formidable foundation in the infra sector.
The bigger opportunity, in the meantime would be to look at penny stocks in the infra sector.
These are shares of companies with a smaller marketcap and which often trade below Rs 100 per share or even Rs 50 per share.
In this article, we’ll look at the best infrastructure penny stocks in India and the potential growth that they present.
These stocks are sometimes considered risks owing to their volatility, low liquidity, and market sentiment shifts.
For this reason, we’ve applied some additional filters such as minimum ROCE and ROE, debt to equity below 1, good promoter holding, and fewer receivable days.
Let’s take a look…
AB Infrabuild is involved in building road contracts, infrastructure, among other things.
The company provides road over bridge, foot over bridge services, and services in new station infrastructure, civil & structural work, track formation, track linking, gauge conversion, and laying new railway lines.
Some of its major clients include Western Railway, MRVC, Central Railway, Municipal Corporation, RCF, Kanakia, and Relcon Infra Projects.
In a big landmark for the company, it migrated from NSE SME Exchange to the main board of NSE and BSE in May 2023.
Going by the company’s half yearly results, it sure seems the growth trajectory is just getting started.
It posted a revenue of Rs 1.1 bn and a net profit of Rs 70 million against a profit of Rs 0.7 million in the year ago period.
| Rs m, standalone | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Net Sales | 549 | 636 | 618 | 643 | 1,231 |
| Growth (%) | -9% | 16% | -3% | 4% | 91% |
| Operating Profit | 90 | 78 | 46 | 54 | 134 |
| OPM (%) | 16% | 12% | 7% | 8% | 11% |
| Net Profit | 28 | 26 | -22 | 9 | 75 |
| Net Margin (%) | 5% | 4% | -4% | 1% | 6% |
| ROE (%) | 21.6 | 11.9 | -8.0 | 3.2 | 23.9 |
| ROCE (%) | 20.3 | 14.7 | 1.3 | 9.2 | 23.5 |
| Dividend (Rs) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Debt to Equity (x) | 1.7 | 0.8 | 0.9 | 1.1 | 0.9 |
The company is anticipating a substantial surge in its order book and expects the performance of second half to be even better.
It’s targeting revenue of Rs 2.3 bn given that it has a robust order book worth Rs 2.1 bn.
In the quarter ended September 2023, promoters of the company brought down their holding from 59.3% to 36.8%.
The promoter holding reduced, but it was absorbed by high-net-worth individuals (HNIs).
Going forward, the company’s specialization in a range of offerings is expected to drive growth.
In the past one year, shares of the company have rallied over 250%.
Next on this list is Julien Agro Infratech.
Erstwhile known as Silverpoint Infratech, Julien Agro is in the business of providing land development, construction services and other related services for civil & structural construction and infrastructure sector projects.
Earlier, the company’s primary business was civil and construction works but last year in 2023, it entered into a new line of business – agro products.
The company is currently planning to expand its existing infrastructure business which it has been doing since last 17 years.
Julien Agro is expected to announce its Q3 earnings later this week on 8 February. Investors would be keen on looking at its operating numbers given that it has posted consecutive losses for the past three quarters.
In an interesting development though, foreign investors have added stake in the company for the past two quarters.
The December 2023 shareholding data revealed that FIIs hiked their stake to 1.98% from 0.5%.
In the past one year, shares of the company have more than doubled investors’ money.
In FY23, the company returned to black after three years of losses. It has also reduced debt in these years.
| Rs m, standalone | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Net Sales | 0.7 | 2.4 | – | 1.5 | 20.0 |
| Growth (%) | – | 227% | – | – | 1250% |
| Operating Profit | 0.1 | -424.0 | -0.5 | -0.4 | 0.7 |
| OPM (%) | – | – | – | – | – |
| Net Profit | 0.0 | -424.0 | -2.1 | -1.4 | 424.3 |
| Net Margin (%) | – | – | – | – | – |
| ROE (%) | 0.0 | -204.8 | 0.0 | 0.0 | 208.3 |
| ROCE (%) | 0.0 | -204.8 | -216.2 | -8.1 | 202.2 |
| Dividend (Rs) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Debt to Equity (x) | 0.0 | 0.0 | -1.8 | -1.5 | 0.0 |
Investors should also note that infra companies like Silverpoint Infra have come under the radar for bogus invoices from shell companies in the past.
So gauge infra companies with the utmost discipline and always check for bad governance.
Next on this list is Tantia Constructions.
This civil construction company has surprised many investors with a 170% rally in the past one year.
The company is basically involved in these key areas –
Some of its completed projects include the airport terminal building – Dibrugarh, Pandu Jetty – Guwahati, Krishna River Bridge, Metro Rail (Tollygunj to Gariahat) – Kolkata.
It recently received a work order worth Rs 70 million from the Government of Tripura.
Before this, it was awarded with an order worth Rs 680 million from COMT Constructions.
A steady order book along with prospects of the order inflow to continue has put Tantia Constructions at the top of the list who can stage a turnaround in FY24.
Tantia Construction has posted consecutive losses for the past two years.
| Rs m, standalone | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Net Sales | 0.5 | 1.2 | 1.0 | 1.1 | 8,403.9 |
| Growth (%) | 141% | 117% | -11% | 10% | 750244% |
| Operating Profit | -0.8 | -0.4 | -24.4 | -0.2 | 33.1 |
| OPM (%) | -147% | -31% | -2394% | -20% | 0% |
| Net Profit | -0.8 | -0.4 | -25.2 | 0.1 | 28.8 |
| Net Margin (%) | -149% | -31% | -2473% | 6% | 0% |
| ROE (%) | -1.1 | -0.5 | -44.9 | 0.2 | 14.9 |
| ROCE (%) | -0.9 | -0.5 | -40.0 | -0.5 | 16.6 |
| Dividend (Rs) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Debt to Equity (x) | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 |
As most of its projects get completed in the next 30 months, the revenue visibility looks good and it could be a smaller player to look at from a turnaround story standpoint.
Fourth on this list is Teamo Productions HQ.
The company is involved in the business of civil engineering and IT support. At present, it’s exploring different avenues to expand business through new avenues.
It was formerly known as GI Engineering Solutions. The company recently renamed itself after entering a new business of film production, distribution and allied services to reflect the business activities more appropriately.
In the past one year, shares of the company have gone up by over 120%.
The ultra low share price that the company trades at is a result of its board approving subdivision of equity shares in the 1:10 ratio.
The company board and shareholders also approved alteration of capital clause of memorandum of association of the company consequent to the subdivision of the face value of the equity shares and preference shares of the company.
Going from its quarterly results performance, the company is looking to finish more or less near the same revenue and profit as last year.
| Rs m, standalone | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Net Sales | 0.5 | 1.2 | 1.0 | 1.1 | 8,403.9 |
| Growth (%) | 141% | 117% | -11% | 10% | 750244% |
| Operating Profit | -0.8 | -0.4 | -24.4 | -0.2 | 33.1 |
| OPM (%) | -147% | -31% | -2394% | -20% | 0% |
| Net Profit | -0.8 | -0.4 | -25.2 | 0.1 | 28.8 |
| Net Margin (%) | -149% | -31% | -2473% | 6% | 0% |
| ROE (%) | -1.1 | -0.5 | -44.9 | 0.2 | 14.9 |
| ROCE (%) | -0.9 | -0.5 | -40.0 | -0.5 | 16.6 |
| Dividend (Rs) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Debt to Equity (x) | 0.0 | 0.1 | 0.0 | 0.0 | 0.0 |
The company recently roped in Indian writer, director, and film producer, Shruti Anindita Varma, for its upcoming Bollywood project titled ‘Vrindavan’, starring Avika Gaur.
Going forward, the company’s water treatment division could come into play as it’s involved in all segments including sanitary sewer systems, alternative septic system designs, package treatment plants, arsenic removal, among other things.
Last on this list is Udayshivakumar Infra.
Udayshivakumar Infra constructs roads including state highways, district roads, smart roads under municipal corporations, smart roads under PM’s smart city mission projects, national highways, Bruhat Bengaluru Mahanagara Palike (BBMP), and Local Area Roads in various Taluka Places, etc.
The company primarily operates in Karnataka. They bid for roads, bridges, irrigation canals, and industrial areas, construction in Karnataka.
Since listing at a 14% discount in April 2023, shares of the company have gained almost 50%.
The constant infra projects received from different government departments and agencies have kept its profit metrics intact.
It had an order book worth over Rs 5 bn as of May 2023, to be executed over next 12-24 months.
| Rs m, standalone | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|
| Net Sales | 1,936 | 2,104 | 1,856 | 2,869 |
| Growth (%) | – | 9% | -12% | 55% |
| Operating Profit | 251 | 236 | 252 | 323 |
| OPM (%) | 13% | 11% | 14% | 11% |
| Net Profit | 105 | 93 | 124 | 160 |
| Net Margin (%) | 5% | 4% | 7% | 6% |
| ROE (%) | 22.4 | 18.1 | 20.9 | 15.6 |
| ROCE (%) | 24.0 | 20.9 | 22.6 | 18.7 |
| Dividend (Rs) | 0.0 | 0.0 | 0.0 | 0.0 |
| Debt to Equity (x) | 0.7 | 0.5 | 0.4 | 0.3 |
Considering the fact that the Indian government wants to massively scale up road construction in the country, you could expect to see some projects being awarded to Udayshivakumar Infra.
To know more, check out Udayshivakumar Infra’s financial factsheet and its latest quarterly results.
The above 5 names performed well on financial metrics and passed on various criteria.
However, there are several more players involved in this space that may not have very impressive numbers but may still get rewarded due to their strong growth prospects.
Here are few names that you could track:
For the entire list, check out the list of infra stocks in India on our website.
With massive capex announcements, the sector is brimming with opportunities.
It’s pretty incredible to see how far this industry has come. We still have a lot of work to do though.
Continued government commitment, private sector participation, and technological adoption are crucial for overcoming challenges and building a robust, efficient, and sustainable infra network.
If you do take on infra penny stocks in your portfolio, exhaustively study their financials, the scope of their projects, and their overall market positioning.
Happy Investing!
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So, in the coming years and decades, we could possibly see a sharp rally in the stocks of electric battery making companies.
If you’re an investor, then you simply cannot ignore this opportunity.
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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.
