If the earlier three quarters of FY18 saw a slowdown in order flows from the National Highways Authority of India (NHAI), the March quarter (Q4) made up for it. NHAI, the backbone of growth for infrastructure firms, awarded twice the orders of the earlier nine months during Q4; and, together with orders from irrigation and railways, construction firms’ order books swelled to a commendable three times annual revenue.

Firms in the spotlight such as Dilip Buildcon Ltd (DBL), Ashoka Buildcon Ltd (ABL), IRB Infrastructure Ltd (IRB) and Sadbhav Engineering Ltd (SEL) won a large part of the road projects awarded in the hybrid annuity model (HAM) and engineering, procurement and construction (EPC) model.

Meanwhile, the firms put up a good operating performance in the quarter on the back of strong execution of EPC projects and rising tolling revenue on existing roads. An improving payments cycle from clients has improved cash flows for most firms.

Ebitda (earnings before interest, taxes, depreciation and amortization), which is indicative of operating efficiencies, improved, too. A report on the industry by HDFC Securities Ltd says, “the average Ebitda margins of our coverage companies’ core construction business has drastically improved in FY18 to 15.2%, compared with 12-13% in the earlier seven financial years."

Indeed, this is a rosy picture from the infra sector that was bedraggled with high debt, weak execution and poor profit margins.

But all this, along with balance sheet restructuring by firms, did not excite investors. Note that the Nifty Infra index has underperformed the Nifty since January, mirroring caution on the street. Concerns are now cropping up on the ability of these firms to execute the huge order book on time. In the earlier cycle about a decade ago, firms got trapped in a debt trap, the genesis of which was in poor execution and credit cycle, as projects were stuck for clearances.

This time round, risks on bank funding are cropping up and the new HAM model relies on banks for resources. Such slip-ups or any delays would set the wheel of cost escalation in motion. That’s not all. Other costs are rising, too, and interest rates are likely to rise.

Meanwhile, the forthcoming polls may also see disruption in infrastructure awards, especially in the second half of FY19, which would weigh on stock prices.