We attended a two-day, fourth annual conference on ‘Road Development in India: Increasing speed, Regaining Momentum’, in Delhi, where a multitude of stakeholders discussed the emerging opportunities in the sector.
Investment in road infrastructure has been a focal point in recent years, as the government has ultimately recognised the fact that inadequate infrastructure has been constraining growth and deterring foreign players from investing in the country.
Political consensus is a necessity for infrastructure development in India, as until and unless the need is severely felt by the government, major fund flows will not materialise in the form of grants/allocations.
The Road infrastructure Sector can provide investors with a platform to expand and grow their roots in the Indian economy.
The government is also focusing on nurturing a profitable partnership with the private sector, to bridge the investment and knowledge gaps in the Road infrastructure.
However, investment in Road Infrastructure calls for huge investments, and while Returns are also high, investors will have to accept the long gestation periods involved.
Thus, it is clear that the way ahead is through well-defined and innovative partnerships.
Overall, we are positive on the Sector, and expect companies skewed towards the road segment, like L&T, IRB Infra, IVRCL Infra, Nagarjuna Constructions, Hindustan Construction, Madhucon Projects and Sadbhav Engineering, to be major beneficiaries, going ahead.
However, due to the sharp rally in the stocks and the consequent outperformance of the sector in CY2009, we adopt a selective approach.
We prefer players that provide a decent blend of growth opportunities and attractive valuations. Our top picks in the Sector are IVRCL Infra and Madhucon Projects.