India aims to become a developed nation by 2047, and if the country achieves the milestone, then the heavy weightlifting has to be done by the infrastructure sector in India. If you look at last year’s budget, the government allocated 3.3% of the total Gross Domestic Product (GDP) to the infrastructure sector (FY24). The major emphasis was on transport and logistics. The same trend is expected to continue in the upcoming budget 2024. In this article, we discuss the infrastructure stocks, its potential, and how investors can make the most of it by picking the right stocks.
What is the infrastructure sector?
Let us start by understanding the sector. The companies in this sector are the backbone of our economy. If there is one sector that keeps the country going, it is infra shares.
Now, for understanding purposes, we can divide it into two categories;
- Transportation Infrastructure: These companies focus on the development, maintenance, and system operations that move people and goods. So, the companies doing work on airports, railroads, ports, etc.
- Utility: These companies provide indispensable services that power lives and support various functions within the country. The companies from power generation, telecommunication, etc can be included in it.
Infrastructure Sector: The Future
The Indian infrastructure sector is around $204.06 billion at present. By 2029, it will grow to $322.27 billion, growing at a CAGR of 9.57% between 2024 and 2029.
The Indian government has set goals and aims to construct a 2 lakh-km national highway network by 2025, increasing the airport count to 220. Not only this, the government will also operationalize 23 waterways by 2030 and establish 35 Multi-Modal Logistics Parks (MMLPs).
Major Plans of Indian Infrastructure
Here is what is already planned for Indian infrastructure in different segments:
Roads: The government has Bharatmala Pariyojana in place, already in Phase 1, and plans to develop 34,800 km of National Highways. It will be completed in 2027-28 after covering 31 states/Union Territories and over 550 districts. The central government will also build 22 greenfield expressways, which opens great opportunities for infra companies in India.
Airport: Under the UDAN (Ude Desh Ka Aam Nagarik), the aviation ministry aims to increase air connectivity to regional airports in smaller towns. The scheme was undertaken in 2016. It aims to make flight services accessible to citizens through air connectivity and developing infrastructure. The FY24 budget allocated Rs 1244 crore to the scheme to revive over 20 airports. Most likely, the FY25 budget will also focus on this scheme and allocate decent-sized funds.
Railways: Indian Railways is already working on ambitious projects like the Chenab bridge in Jammu & Kashmir – the world’s highest railway bridge and the Mumbai-Ahmedabad Speed Rail Corridor, the world’s highest pier bridge under construction. The Indian railways aims to become a Net Zero carbon emitter by the end of this decade. It means that renewable energy companies will come into play.
Ports: As per World Bank’s Logistics Performance Index (LPI), the Indian Ports ‘Turn Around Time’ has reached 0.9 days, which is better than most developed countries – the USA is at 1.5 days and Australia at 1.7 days. The Union Minister for Ports, Shipping, and Waterways said that the country’s total port capacity will increase from the existing 2,600 MTPA to more than 10,000 MTPA in 2047.
Companies in the Infrastructure Sector
Here are some of the companies from the best infra stocks with their market cap to help you understand how big they are. You can check other companies too, as the list is long:
Opportunity for Infra companies in India
Here are some reasons infra companies will do better in upcoming years:
High Capex: As discussed above, the Indian government has proposed capital expenditure (capex) for this sector, and this trend is likely to continue. Hence, companies from this sector will do better.
Upgrade Existing Infra: It is not only about the upcoming and new projects. The Indian government also aims to boost India’s existing infra, which is aging and requires modernization. There is a huge scope for Indian companies to take on these projects and increase their topline and bottomline.
Focus on Sustainability: India is increasingly focusing on sustainable infrastructure development. It includes investments in renewable energy projects, green transportation solutions, and energy-efficient buildings. It presents options for Indian companies with expertise in these areas.
What should investors do?
It would not be wrong to say that the Indian infra shares is on the cusp of a major growth trajectory. As an investor, you should not miss this growth story, and you should consider infra companies in your portfolio. But do you find it difficult to pick stocks for long term for your portfolio? We do understand that it is not everyone’s cup of tea.
And if you do it without the required knowledge, you will burn your fingers. If you are in the same situation, please check Jarvis Invest – an AI stock advisory platform that makes direct equity investment seamless.