India Infra FY27: ₹11.1 Lakh Cr Government Capex, But Who Is Actually Executing?

29 Jun 2026·9 min read·Free Report

30-second version

1.Government capex in FY26 came in at ₹10.18 lakh cr against a ₹11.11 lakh cr target — an 8.4% undershoot — and Budget 2026-27 has repeated the same headline number. L&T's order inflows for FY26 hit ₹3.71 lakh cr (up 20% YoY), but EBITDA margins in its core E&C segment compressed 40 bps to 8.3% as commodity and subcontractor costs bit harder than management guided.
2.DIIs have been net buyers in infra-adjacent names through Q1 FY27, but FII flows remain tepid — foreign ownership in NTPC dropped from 14.2% to 12.8% over the last two quarters, signalling that the power capex story is domestically crowded. Insider buying at KEC International picked up in March-April 2026 after the stock corrected 44% from its 52W high of ₹937.
3.KEC at ₹520 trades at 17x trailing earnings versus its 5-year average of 22x — the cheapest it has been on a relative basis since the COVID lows. L&T at ₹4,212 is at 28x trailing, near fair value. IRFC at ₹90.59 is at 12x earnings but earnings growth is structurally capped at 3-4% because its spread over cost of funds cannot widen.

01What's happening

Budget 2026-27, presented in February 2026, maintained infrastructure capex at ₹11.11 lakh crore — identical to the FY26 revised estimate — with roads getting ₹2.87 lakh cr and railways ₹2.52 lakh cr. What the headline misses: FY26 actual capex landed at ₹10.18 lakh cr, a shortfall of roughly ₹93,000 cr, because Q1 and Q2 FY26 were soft due to election-related spending freezes and then monsoon disruptions. The same front-loading problem is already visible in FY27 — NHAI awarded only 1,840 km of road projects in Q4 FY26, against a full-year target of 6,500 km, which means execution pressure will again get dumped into H2 FY27. L&T reported Q4 FY26 order inflows of ₹97,000 cr, taking the FY26 total to a record ₹3.71 lakh cr, and its order book now sits at ₹5.74 lakh cr — roughly 2.8x trailing revenue — but the international mix has risen to 48%, introducing currency and geopolitical execution complexity that domestic investors tend to underweight. KEC International's Q4 FY26 revenue grew 18% YoY to ₹5,980 cr but net profit came in at ₹168 cr, well below street estimates, as interest costs on working capital rose 22% QoQ. Power Grid Corporation received capex approval for ₹1.14 lakh cr in inter-state transmission projects through FY30, and NTPC's installed capacity crossed 78 GW in May 2026, with 28 GW under construction — the largest pipeline in the company's history. IRFC's disbursements in FY26 were ₹69,200 cr, but with Railway Ministry capex already 90% funded through the budget and IRFC's spreads capped by the Ministry's fixed lending rate, incremental earnings upside is structurally thin.

02Why this matters for your portfolio

The structural case for Indian infrastructure remains intact over a 3-5 year horizon: India's infrastructure investment as a percentage of GDP is targeting 6.5-7%, up from 4.9% in FY20, and the gap between current stock of infrastructure and what a $5 trillion economy needs is real and not closeable without sustained multi-year spending. For a retail investor with a 2-3 year horizon, the more relevant question is which companies convert this capex into earnings rather than just order book. L&T's core E&C ROCE was 14.8% in FY26 — decent but not exceptional given the working capital intensity — and the bull case rests on the IT and financial services subsidiaries re-rating the conglomerate, not just construction margin expansion. KEC is the cleaner play on power transmission capex: it operates in a segment where domestic ordering from Power Grid and state DISCOMs is accelerating, international diversification is paying off (SAE Towers contributing ₹900 cr in revenue), and at current prices the stock is pricing in almost no recovery in margins despite commodity tailwinds from falling copper and aluminium prices in Q1 FY27. NTPC's renewable capacity target of 60 GW by FY32 requires annual capex of ₹25,000-28,000 cr, which is already baked into the balance sheet — the earnings story is a regulated return of 15.5% on equity, meaning the upside is stable and bond-like, not explosive. Power Grid is the most defensive name in the space: regulated ROE of 15.5%, near-zero customer concentration risk, and a transmission pipeline that guarantees revenue visibility through FY29. The sector as a whole has re-rated from 18x to 25x forward earnings between FY22 and FY24 on policy optimism; that re-rating is now largely done, and from here, earnings delivery, not multiple expansion, drives returns.

03Valuation check

Current multiples vs. 5-year averages. Verdict based on trailing twelve months earnings.

043 stocks worth watching

Fundamentally sound names with a clear thesis. Not buy/sell recommendations.

05Contrarian take

The bear case — what the bulls are missing

Here's what the bulls are missing: the single biggest risk to the FY27 infra capex story is not global macro — it is state government fiscal stress quietly undermining the Centre's headline numbers. States are supposed to contribute 40% of total infrastructure spending, but 14 major states ran a combined fiscal deficit of 3.6% of GSDP in FY26, and capex from states like Rajasthan, Punjab and Tamil Nadu came in 15-22% below budget targets. NHAI's debt load crossed ₹3.8 lakh cr in FY26, and with toll revenue growth slowing to 8% YoY (down from 14% in FY25), the agency's debt-service coverage is tightening — project awards will slow if borrowing costs rise even 50 bps. KEC's working capital days stretched from 94 to 117 days in FY26 as overseas project clients in the Middle East and Africa delayed payments; if this drags to 130 days, the company's net debt — already at ₹4,200 cr — becomes a material constraint on bidding capacity. The market is also completely ignoring that L&T's ₹5.74 lakh cr order book carries roughly ₹82,000 cr of GCC and Middle East-linked projects where sovereign payment risk is non-trivial, and the company does not hedge its SAR and AED receivables beyond 6 months. Finally, IRFC at any price above ₹88 is essentially a bond proxy with equity risk — if Railway Ministry allocations get trimmed in any mid-year revision, IRFC's disbursement growth drops to near zero with no operational lever to pull.

06Sources

Primary sources only · No broker reports

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