Over the last few years, in every Union Budget, we have seen massive investment allocation for infrastructure development in India. This shows how serious the government is about developing the infrastructure which is the backbone of a developed country. That’s why the infrastructure sector will give rise to many business opportunities making select infrastructure stocks in India the best stocks for investment.
In this article let’s take a detailed look at:
What is infrastructure?
Sectors where one can find the best infrastructure stocks in India for investment
Which are the best infrastructure stocks in India?
What is infrastructure?
Infrastructure is a term generally used for describing the basic physical systems of a business, geographical area, or country. Transportation systems including roads, railways, ports and airports, communication networks such as mobile phone towers, telecommunication systems and lines, drainage systems, water pipes, and processing units, and electricity plants and grids are some of the best examples of infrastructure. Infrastructure systems are highly capital intensive and considered the backbone of a country’s economic development and prosperity. Infrastructure projects are usually funded publicly (sponsored by the government) or privately or through public-private partnerships.
The infrastructure sector in India can be broadly classified into segments such as power, airports, aerodromes, railways, ports, bridges, flyovers, dams, roads, and urban infrastructure development.
The transport infrastructure sector in India which was earlier plagued by countless problems and costly delays has witnessed a drastic change under the leadership of Union Road Transport and Highways Minister Nitin Gadkari. He has been instrumental in reviving stalled highway projects and speeding up the pace at which highways are being constructed in India. From a construction rate of just about 12 km per day in 2014-15, the rate has reached 37 km a day during FY 21. This is further expected to touch 40 km per day in the coming days. India has achieved this world record of constructing the fastest highways in the world despite the disruption caused by the Covid 19 pandemic that had abruptly halted construction for few months from April 20.
A framed quote by former American president John F Kennedy prominently displayed in his office reveals how serious he is about infrastructure development in the country.
“American roads are good not because America is rich. America is rich because American roads are good.”
To further give a push to the country’s infrastructure, in the latest Union Budget, the government has allocated 34.5% more for infrastructure development as compared to the previous year and given equal emphasis for the development of physical infrastructure in the country.
Rs 20,000 crore has been allocated to set up and capitalize a Development Financial Institution (DFI) that will act as a provider, enabler, and catalyst for infrastructure financing. A Rs 5 lakh crore lending portfolio will be created under the proposed DFI in three years. Ministry of Road Transport and Highways has been allocated its highest ever outlay of Rs 1,18,101 crore in the latest budget, of which Rs 1,08,230 crore is for capital expenditure.
For an approximate investment of Rs 5.35 lakh crore, already 13,000 km of roads worth 3.3 lakh crore rupees have been awarded for construction under the Bharatmala Pariyojana.
Railways too have been allocated a massive amount of Rs 1,07,100 crore for capital expenditure with an objective of 100% electrification of broad-gauge routes by December 2023.
Sectors where one can find the best infrastructure stocks in India for investment
The push for infrastructure development in the country is likely to benefit many companies operating in the engineering and capital goods sector that possess the capacity to build and execute large projects. As cement is a critical component of construction, cement manufacturers are also likely to benefit immensely. Some of the best stocks to buy can be found in the cement sector too.
Infrastructure development in the country acts as big GDP multipliers and is considered the biggest enabler for socio-economic growth. India needs a robust infrastructure that will support its leap towards becoming a USD 5 trillion economy. Many businesses which will participate in this mammoth infrastructure development are likely to outperform over the next few years. And the best part is that many such stocks are available at good valuations currently due to market correction in the last few months.
Which are the best infrastructure stocks in India?
Larsen & Toubro
Headquartered in Mumbai, Larsen & Toubro also known as L&T is India\’s top multinational engineering, construction, manufacturing, technology, and financial services group. Founded by two Danish engineers the company ranks among the top five construction companies in the world and mainly caters to key sectors such as hydrocarbon, infrastructure, power, process industries, and defense equipment’s through its 118 subsidiaries, 6 associates, 25 JVs, and 35 joint operations companies.
Adani Ports and SEZ
Adani Ports and Special Economic Zone Limited (APSEZ Ltd.) is India’s largest private port operator which offers end-to-end logistics services. The company has acquired and developed an unparalleled portfolio of port infrastructure and services across the country and currently manages over 24% of the port capacity in India.
Dilip Buildcon
Dilip Buildcon is a leading player in the engineering, procurement, and construction (EPC) segment in India and specializes in the construction and maintenance of roads, high-capacity transport corridors, bridges, tunnels, as well as building construction, pump stations, and civil infrastructure.
Engineers India L.td
Established in the year 1965, Engineers India Ltd (EIL) is a leading global engineering consultancy and EPC company that primarily offers engineering consultancy and EPC services to the oil & gas and petrochemical industries.
Engineers India Ltd. has also diversified into sectors like infrastructure, water and waste management, solar & nuclear power, and fertilizers. The company offers end-to-end engineering and consultancy services from design, engineering, procurement, construction, and comprehensive project management services.
Disclaimer: The stocks mentioned above are only for information purposes and should not be considered as a recommendation to buy or invest.
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