Best Infrastructure Stocks in India

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best infrastructure stocks in india

Infrastructure is a term that refers to the common physical systems of a country, business, or region. For example, communication networks, transportation systems, and utilities like gas, electricity, water, etc. come under infrastructure. Note that these systems are very crucial for the growth, development, and prosperity of a country. Another thing about these systems is, that they tend to be a high-cost investment and are also capital-intensive. Moreover, the companies functioning in this sector offer their stocks known as infrastructure stocks. Some good examples of infrastructure stocks in India include Bharti Airtel (Telecommunication Services) and Ashok Leyland (Trucks and Buses).

List of Best Infrastructure Stocks

Overview of Infrastructure Stocks

Larsen & Toubro Shares

Larsen & Toubro Ltd is a big company that does a lot of different things in many parts of the world. They focus on providing solutions for building stuff, like bridges and power plants, and also work in industries like technology and finance.

GMR Airports Inf Stocks

GMR Infrastructure primarily focuses on the development, upkeep, and operation of airports, power generation, coal mining, exploration endeavors, highway development, management, and operation of special economic zones. Additionally, the company is involved in construction activities, including Engineering, Procurement, and Construction (EPC) contracting.

IRB Infra. Devl. Shares

IRB Infrastructure Developers Ltd, a prominent player in the Indian infrastructure domain, boasts substantial expertise in the development and construction of roads and highways. The company extends its influence across various segments within the infrastructure sector, encompassing road maintenance, construction, airport development, and real estate ventures.

Ircon Intl. Stocks

Established in 1976 as a railway construction company, Ircon International Limited (IRCON) has undergone a progressive diversification since 1985. It has evolved into an integrated engineering and construction Public Sector Undertaking (PSU) with a focus on large and technologically complex infrastructure projects across diverse sectors, including railways, highways, and more.

Rites Shares

Founded in 1974, RITES Limited stands as a prominent public sector enterprise, playing a key role in the transport consultancy and engineering sector in India. With a broad range of services and a widespread geographical presence, the company serves as the exclusive export entity for Indian Railways, offering rolling stock internationally, excluding Thailand, Malaysia, and Indonesia.

G R Infraproject Stocks

Established in 1995, G R Infraprojects Ltd is a comprehensive Engineering, Procurement, and Construction (EPC) company specializing in roads. With a proven track record, the company has expertise in designing and executing diverse road and highway projects spanning 15 states in India. G R Infraprojects primarily engages in civil construction ventures, operating under both EPC and BOT (Build Operate Transfer) frameworks within the road sector.

HFCL Shares

HFCL Ltd, also known as Himachal Futuristic Communications Limited, is a versatile telecom infrastructure facilitator engaged in various aspects of the industry. Its interests encompass the development of telecom infrastructure, integration of systems, as well as the manufacturing and supply of advanced telecom equipment, optical fiber, and optic fiber cables (OFC).

Engineers India Stocks

Founded in 1965, Engineers India Ltd (EIL) stands as a prominent global engineering consultancy and EPC company that is government-owned by the Ministry of Petroleum and Natural Gas (MoPNG) in India. EIL operates under the administrative control of MoPNG and specializes in offering engineering consultancy and EPC services, with a primary focus on the oil & gas and petrochemical sectors.

Reliance Infra. Shares

Reliance Infrastructure Ltd. stands as a prominent infrastructure enterprise, actively involved in the advancement of infrastructure projects through diverse Special Purpose Vehicles (SPVs) within sectors such as power, roads, metro rail, airports, and the defense sector. Additionally, the company holds a significant position in the utility sector, spanning the entire power value chain, encompassing generation, transmission, distribution, and power trading.

Techno Elec.Engg Stocks

Techno Electric & Engineering Company Ltd (TEECL) specializes in delivering comprehensive services within the power infrastructure sector, encompassing Engineering, Procurement, and Construction (EPC), as well as asset ownership and operations and maintenance.

Future of Infrastructure Sector in India

India has a growing ambition to become a major economic superpower. This ambition has to be driven by various sectors of which, the infrastructure sector is a major growth engine. With its immense power to cause a domino effect in the economy, it's a no-brainer that the government of India is looking to amp up its capital expenditure budget after budget. The infrastructure sector includes power, bridges, dams, roads, and urban infrastructure development. India is said to become the world's third-largest construction market. Various schemes launched by the government promise huge opportunities for the companies involved in infrastructure-related activities. Under the National Infrastructure Pipeline, Housing For All 100-PM GatiShakti Cargo Terminals, and Smart Cities Project are some of the avenues that provide the impetus for the growth of infrastructure in India. 

Types of Infrastructure Systems 

The infrastructure systems can be divided into three broad categories given as follows:

  • Soft Infrastructure: This type of infrastructure is less capital intensive and ensures smooth and obstacle-free functioning of the country. This includes financial institutions, law enforcement, governmental systems, education systems, etc. 
  • Hard Infrastructure : This type of infrastructure system includes physical systems that allow businesses to run an efficient industrialized and modern nation. Some examples are highways, roadways, etc. These systems need capital and assets for functions and operations. 
  • Critical Infrastructure: Finally, there is a critical infrastructure segment that is very crucial for the basic functioning of a country. This includes companies and businesses operating in energy, telecommunication, electricity, agriculture, public health, and so on. 

How to Select the Best Infra Stocks to Invest

The best way to evaluate infrastructure stocks is to thoroughly examine their quantitative and qualitative dimensions. This involves mainly three points:

  • Physical assets owned by the company 
  • Company itself 
  • Relationship between stock valuation and quality 

When choosing the best infrastructure stock, an investor should look for capital appreciation as well as net income. Further, when looking at different physical assets, you should consider the factors such as growth prospects, the market position of the firm, and the contract or regulatory framework. And because the contract framework helps in computing the revenues, it should be analyzed carefully. 

Management in infra stocks: As an investor, you should also closely observe the capital structure, strategic direction, corporate governance issues, and operational quality of the entire management of the company. Once you analyze the company's quality and its asset level, you should focus on the overall performance and quality of the business. 

Order Execution by infra companies: It is a key factor that determines the quality of business and the better the quality, the higher will be the evaluation. However, keep in mind that a fat order book doesn't mean anything if the company is not able to run the projects in a fast and efficient way. Most projects now come with deadlines and incur penalties in case of late delivery. 

Financial Stability in infrastructure stocks: Next, the consolidated statements of a company including its profit and loss data, balance sheet, cash flow statement, etc. also need to be analyzed to determine the quality and performance of the infrastructure company. The fundamental ratios to analyze include debt-equity ratio, book-to-sales ratio, price-to-book ratio, asset management ratio, and a few others. 

Debt to Equity ratio in infrastructure shares: As we have discussed above, infrastructure companies are capital intensive, you will find their debt to be slightly high on their balance sheets. Here, you need to ascertain whether the company has sufficient returns and profits concerning the debt it raised. Besides, you should also take into account the interest cover ratio, which can be easily calculated by the following formula:

Interest Cover Ratio = Operating Cash Flow ÷ Borrowing Cost Paid

If you don't already know, most of these ratios are linked with each other and hence, shouldn't be treated individually. These ratios can provide you with the most crucial past, current, and future performance of an infrastructure company. 

Important things to remember:

Do Not Blindly Follow Hot Tips: No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

Eliminate Loser Stocks from Portfolio: There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

Don't Exceed Your Investment Budget Abruptly: While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

Bottom Line 

Infrastructure companies play a very important role in defining the growth and development of our country. This accounts for the increasing popularity of infrastructure stocks. By investing in the right infrastructure stocks, you can not only gain higher returns over the long term but also secure your financial future to a great extent. We hope this information on infrastructure investment helps you. 

  • What is infrastructure investment?

  • Is infrastructure a safe investment?

  • What asset class is infrastructure?

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