Afcons Infrastructure Ltd Management Discussions

GLOBAL ECONOMY

FY 2025-26 was a defining year from a global economic perspective. The fiscal year witnessed significant developments across three critical fronts: trade, technology and geopolitics. The year began with a sharp escalation in trade policy following the USAs announcement of Liberation Day tariffs on April 2, 2025. This was followed by a period of heightened uncertainty, with tariffs on certain trading partners rising to as high as 50% and reciprocal tariffs imposed on US goods by several countries. Although the US Supreme Court struck down select tariffs, the overall effective US tariff rate averaged around 10%, with bilateral tariffs for key partners like China, India and others ranging from 15% to over 50%, signalling the end of the prolonged phase of low global tariffs.

Alongside this, the year witnessed a significant acceleration in technological disruption, driven by rapid advancements in AI. While this technological advancement supported investment, particularly in Al-linked capex, it also introduced new uncertainties, with concerns emerging about labour displacement, especially in services.

Meanwhile, the prolonged Russia-Ukraine conflict continued to weigh on global trade and economic stability. Geopolitical tensions further intensified this year, culminating in a direct confrontation involving the US, Israel and Iran. The conflict disrupted the global supply chains, including the temporary closure of the Strait of Hormuz. This drove a sharp rise in crude oil prices and shipping costs, adding to global volatility and complicating the inflation outlook. More importantly, the sheer unpredictability of these prolonged conflicts has induced a pervasive sense of caution in global capital markets. Foreign direct investment (FDI) flows and sovereign funding for large-scale cross-border infrastructure projects have faced significant delays as investors retreat to safer assets.

Against this backdrop, global growth is projected at 3.1% in 2026, compared with 3.4% in 2025, before improving marginally to 3.2% in 2027, according to the International Monetary Fund (IMF) World Economic Outlook (April 2026). However, growth trends remained uneven across regions. Advanced Economies are projected to grow by 1.8% in 2026, down from 1.9% in 2025, and further moderate to 1.7% in 2027, reflecting weak industrial activity, tighter financial conditions and subdued consumer demand. Emerging Market and Developing Economies are projected to grow by 3.9% in 2026 compared with 4.4% in 2025, before recovering to 4.2% in 2027, supported by domestic demand resilience and easing financial conditions in select markets.

Global headline inflation is projected to increase from 4.1% in 2025 to 4.4% in 2026, before moderating to 3.7% in 2027. The increase is primarily attributable to elevated energy prices, supply chain disruptions and trade-related cost pressures arising from heightened geopolitical and trade uncertainties.

Outlook:

Looking ahead, some of these pressures are likely to ease as geopolitical tensions stabilise, though they may not fully subside, allowing supply-side constraints to gradually unwind. At the same time, the benefits of AI adoption are expected to increasingly translate into productivity gains, supporting medium-term growth. However, risks remain, particularly if supply shocks begin to transmit into broader demand weakness globally. In this context, the policy response, reforms and balance sheet resilience will be critical in determining the global growth trajectory.

Real GDP Growth (%) - Global

INDIAN ECONOMY

Amidst the geopolitical uncertainty and global economic volatility, India retained its position as the worlds fastest-growing major economy, with GDP growth rising to 7.6% in FY 2025-26 from 7.1% in FY 2024-25, highlighting the strength of domestic demand and structural reforms in driving economic expansion, according to the Second Advance Estimates published by MoSPI in February 2026, based on the new series with base year 2022-23. Overall economic performance in FY 2025-26 was primarily due to robust real growth observed in Q2 (8.4%) and Q3 (7.8%). Growth momentum during the fiscal year was supported by strong domestic consumption demand, rising infrastructure investment and expanding services activity across sectors such as finance, digital services and logistics. According to the new series with base year 2022-23, the real GDP growth has been revised to 7.2% and 7.1%, respectively, during FY 2023-24 and FY 2024-25.

Inflationary pressures moderated significantly during the year, supported by easing food prices, improved supply conditions and policy measures aimed at maintaining macroeconomic stability. Average headline Consumer Price Index (CPI) inflation for April-December 2025 declined to 1.7%, while recent MoSPI data indicated 3.4% CPI inflation in March 2026, reflecting that inflation moderated during the first nine months of the year but witnessed an uptick in the last quarter. The Reserve Bank of Indias Monetary Policy Committee (MPC), in its meeting held on April 8, 2026, projected CPI inflation at 4.6% for FY 2026-27.

In response to the easing inflationary environment, the RBIs Monetary Policy Committee (MPC) cumulatively reduced the repo rate by 100 basis points during its meetings from April to December 2025. In its latest MPC meeting on 8th April, 2026, the RBI kept the repo rate unchanged and maintained a neutral stance, reflecting the balancing act required amid evolving macroeconomic conditions, particularly geopolitical uncertainties and global supply chain disruptions.

Outlook:

Following a year marked by major structural reforms, particularly labour laws and GST simplification, India enters FY 2026-27 with a relatively stronger growth path. A diversified consumption base, sustained government capital expenditure, resilient services activity and continued support towards the manufacturing ecosystem are expected to support economic growth in the range of 6.8% to 7.2% during FY 2026-27, as projected in the Economic Survey 2025-26.

Union Budget FY 2026-27

The Union Budget 2026-27 reinforces infrastructure-led growth through higher capital expenditure and significant allocations toward mobility and urban infrastructure. The government has increased public capital expenditure to 12.2 lakh crores for the fiscal year, up from 11.2 lakh crores in FY 2025-26 (RE), reflecting a 9% year-on-year increase. Including grant-in-aid for the creation of capital assets, the effective capital expenditure budgeted for the current year stands at a record 17.1 lakh crores. The allocation will support both ongoing and new infrastructure projects, particularly in highways, railways and urban transport, including metro networks. This sustained capex push is expected to generate multiplier effects across manufacturing, logistics, trade and urban development. The expanding public investment pipeline is also likely to provide long-term visibility for developers, EPC contractors, private equity investors and infrastructure lenders.

To further catalyse private-sector participation, the budget proposed establishing an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders financing infrastructure projects. This measure aims to improve financing conditions and mitigate construction-phase risks for developers.

Citing cities as engines of growth, innovation and economic opportunity, Government of India emphasised the need to strengthen infrastructure development in Tier II and Tier III cities, as well as temple towns, where demand for modern infrastructure and basic urban amenities is rising. To unlock the economic potential of urban clusters, the Government will identify City Economic Regions (CERs) based on their specific growth drivers, with an allocation of 5,000 crores per CER over five years to support infrastructure development and regional economic expansion.

GLOBAL CONSTRUCTION SECTOR

Global construction activity is expected to regain modest momentum in 2026 following a slowdown in 2025. The global construction industry is expected to grow by 2.7% in real terms in 2026, compared with 1.8% growth in 2025, supported by stabilising economic conditions and continued infrastructure investment in certain markets. The value of the global construction industry is projected to increase from USD 6.24 trillion in 2025 to USD 6.66 trillion in 2026, reflecting steady expansion across both developed and emerging economies, according to BMI Research, Fitch Solutions.

Despite the projected statistical recovery, the global construction industry continues to suffer under the weight of ongoing geopolitical conflicts and regional wars. The prolonged hostilities in Eastern Europe and the Middle East have fragmented established supply chains and induced significant volatility in global commodity markets. Consequently, the industry is grappling with inflated prices for critical raw materials, reduced availability of petroleum and related products, alongside elevated cross-border freight costs.

Furthermore, the geopolitical uncertainty has forced both public sponsors and private developers to adopt a cautious approach toward capital expenditure. For international EPC contractors, this environment translates into a challenging operating landscape characterized by elongated project award cycles, heightened execution risks, and compressed operating margins.

The Asia-Pacific region, which accounted for 39.5% of the global construction market in 2024, is expected to witness a recovery in construction activity, with growth forecast to reach 3.5% in 2026, up from 1.5% in 2025. Sub-Saharan Africa is projected to remain one of the fastest-growing construction markets, with growth accelerating to 5.4% in 2026 from 4.2% in 2025, supported by investments in transport infrastructure, energy and urban development. Construction growth in Latin America is expected to improve to 2.1% in 2026, compared with 1.4% in 2025, while Europe is forecast to record a gradual recovery with growth rising to 2.1% in 2026 from 1.8% in 2025.

In contrast, growth in the Middle East and North Africa (MENA) region is expected to moderate slightly to 3.2% in 2026 from 3.4% in 2025, reflecting adjustments in project pipelines across some Gulf economies. Construction growth in North America is forecast to remain largely stable at around 1.9% in 2026 compared to growth of 1.8% in 2025.

Major infrastructure markets will continue to shape global construction demand. China and the United States are expected to remain the worlds largest construction markets, although both face structural challenges that could moderate infrastructure investment in the medium term. India is emerging as a key global infrastructure growth centre, supported by policy initiatives and sustained public investment in transport networks, logistics, urban development and industrial corridors.

In Southeast Asia, the ASEAN region is expected to remain one of the fastest-growing infrastructure markets, led by strong construction activity in Indonesia, the Philippines and Vietnam, where governments are prioritising transport networks, energy infrastructure and urban development to support long-term economic growth.

Middle East and North Africa (MENA) Construction Sector

The Middle East and North Africa (MENA) construction sector continues to demonstrate steady expansion, albeit with a gradual moderation in growth following a period of strong post-pandemic momentum. According to BMI Research (Fitch Solutions), the sector expanded by approximately 3.5% in 2025 and is projected to grow by 3.2% in 2026 and 2.9% in 2027, reflecting a stabilisation in activity levels. Over the medium term, growth is expected to average 2.9% during 2026-2030, before moderating further to ~2.6% by 2035, indicating a transition towards a more measured and execution-driven growth cycle.

In value terms, the MENA construction industry is projected to increase from approximately USD 352 billion in 2025 to around USD 470 billion by 2030, with the regions share of global construction output rising marginally from 5.6% to 5.7% over the same period, the report said. This growth trajectory reflects sustained infrastructure demand, supported by ongoing urbanisation and long-term economic diversification programmes across key economies in the region.

The region has outperformed global peers in recent years, recording an average annual real growth rate of ~6.3% between 2021 and 2025, supported by large-scale infrastructure investments aimed at diversifying economies away from hydrocarbon dependence. However, the growth outlook is moderating due to lower oil revenues, evolving fiscal priorities and a strategic recalibration away from construction-heavy megaprojects, particularly in key Gulf economies.

Major markets such as Saudi Arabia, the UAE and Egypt continue to anchor regional activity, although the pace of project execution, especially for large-scale developments, remains a key monitorable. In Saudi Arabia, investment priorities are gradually shifting towards logistics, manufacturing and technology infrastructure, which may influence the pace and composition of construction activity over the medium term. At the regional level, Egypt and Morocco are expected to outperform, supported by infrastructure demand and increasing private sector participation, while early reconstruction activity in select geographies presents additional upside potential.

The construction pipeline of MENA regions remains diversified, with transport and water infrastructure emerging as key growth segments. Rail projects account for the largest share of the pipeline, followed closely by roads and water infrastructure, reflecting the regions focus on connectivity and resource security.

The recent West Asia conflict has introduced significant uncertainty to the Middle Easts economic and investment environment. The lack of a clear timeline for the resolution of these conflicts remains a primary challenge, leading to a more cautious capital expenditure climate and potential delays in new project decisions. Furthermore, the ongoing situation continues to drive short-term supply chain disruptions, logistical bottlenecks, and energy price volatility which put pressure on broader project awarding and execution activity.

Despite these immediate headwinds, the region presents potential opportunities over the medium to long term. Eventual post-conflict reconstruction and the rehabilitation of damaged infrastructure, utilities, and energy facilities are expected to generate substantial project pipelines. Simultaneously, heightened geopolitical tensions are driving regional governments to increase investments in defence-related infrastructure and strategic national security assets.

Sub-Saharan Africa (SSA) Construction Sector

The Sub-Saharan Africa (SSA) construction sector is expected to expand by 4.3% in real terms in 2026, compared to 4.5% in 2025, owing to evolving global macroeconomic conditions and geopolitical tensions, according to BMI Research, Fitch Solutions. This follows a relatively subdued performance over the past five years, during which the sector recorded an average annual growth of 2.2% between 2021 and 2025. Over the medium term, growth is projected to strengthen, with the industry expected to register an average annual expansion of 5.3% between 2027 and 2030, positioning SSA as the fastest-growing construction market globally during this period.

In value terms, the construction industry is projected to increase from approximately USD 94.1 billion in 2025 to USD 107.3 billion in 2026, and further to USD 162.4 billion by 2030. Despite this strong growth trajectory, SSA will continue to account for a relatively small share of the global construction market, with its contribution expected to rise modestly from 1.5% in 2025 to 2.0% by 2030.

The near-term outlook reflects a moderation in growth, driven by elevated construction input costs and weaker macroeconomic conditions arising from geopolitical disruptions. Higher energy prices and supply chain constraints have increased the cost of key construction inputs, placing pressure on project economics and timelines. These factors are expected to delay new project commencements, strain ongoing project budgets, and result in more cautious investment activity across the region.

Despite these near-term headwinds, the medium-term outlook remains constructive, supported by a strong pipeline of infrastructure investments. Growth will be driven by continued investments in logistics corridors, transport networks, and resource-linked infrastructure, underpinned by rising global demand for critical minerals and the ongoing energy transition. These structural drivers are expected to sustain construction activity across the region over the coming years.

Growth trends across SSA markets are expected to remain uneven. Ethiopia, Cote dIvoire, and Uganda are projected to lead among larger markets, each delivering average annual real growth exceeding 7% between 2026 and 2030, supported by investments in transport infrastructure, mining-linked development, and public infrastructure programmes. Other markets such as Tanzania, Kenya, and Cameroon are expected to maintain steady growth, while South Africa is likely to underperform, with average growth of around 1.4% over the same period, reflecting persistent challenges in project execution and capital formation.

INDIA INFRASTRUCTURE SECTOR

Indias construction sector remains a critical pillar of economic growth, contributing nearly 9% to the countrys GDP and serving as a key enabler of investment, employment and industrial expansion. The sector has transitioned from incremental capacity addition to large-scale, execution-led development, supported by sustained public capital expenditure, policy continuity and improving project delivery capabilities.

The Governments infrastructure push continues to anchor this momentum, with a record capital expenditure outlay of 12.2 lakh crores in FY 2026-27 reflecting a strong drive toward public investment. Flagship programmes such as PM Gati Shakti and the second phase of National Monetisation Pipeline (NMP 2.0) have strengthened project planning, improved inter-agency coordination and unlocked value from existing assets. Reforms in public-private partnership (PPP) frameworks, the growth of Infrastructure Investment Trusts (InvITs) and the proposed Infrastructure Risk Guarantee Fund are enhancing private sector participation. Furthermore, the government is stepping up efforts to attract greater participation from insurers and pension funds, aiming to unlock stable pools of long-term domestic capital. This is expected to deepen financing avenues and support sustained infrastructure investment over the medium term.

Infrastructure development remains concentrated across key segments, including transport, logistics and urban infrastructure. Investments in highways, high speed rail, dedicated freight corridors, rail corridors, metro systems, ports, inland waterways and logistics parks are driving improvements in connectivity and supply chain efficiency, reducing logistics costs and enhancing Indias global competitiveness. This long-term growth trajectory is further reinforced by underlying structural drivers. Rapid urbanisation and expansion of industrial and manufacturing ecosystems are accelerating the demand for urban transport, housing, water, and social infrastructure across Tier-1, Tier-2, and Tier-3 cities.

Despite this robust macroeconomic backdrop and strong project pipeline, the infrastructure sector faces near-term ground realities and operational headwinds. Global geopolitical conflicts continue to induce supply chain disruptions and volatility in raw material costs, creating uncertainties that can impact project execution.

Furthermore, the domestic project awarding landscape is undergoing a transition, with a growing emphasis on PPP models, such as Hybrid Annuity Model (HAM) and Build-Operate-Transfer (BOT). While this shift effectively attracts private capital and optimizes risk sharing, this has led to a temporary moderation in the pace of new EPC project awards. In addition, certain segments of the infrastructure industry are experiencing heightened competitive intensity with aggressive bidding by newer entrants in technically challenging projects. In this dynamic environment, maintaining strict bidding discipline, focusing on complex projects with higher entry barriers, and ensuring robust supply chain management remain critical to protecting margins and ensuring sustainable growth.

12.2 lakh crores

Capital Expenditure in FY 2026-27

SURFACE TRANSPORT Road and Highways

Indias road network has expanded rapidly over the past decade, becoming the worlds second-largest. The national highway network has grown to 1,46,560 km as of December 2025. The length of operational high-speed corridors and expressways has surged to 3,052 km in 2025 while the length of 4-lane and above National Highways, including access-controlled corridors has reached 43,512 km. Flagship initiatives such as Bharatmala Pariyojana (including the subsumed NHDP), SARDP-NE, LWE Road Development Programme (including the Vijayawada-Ranchi Road), and Externally Aided Projects (EAP) have played a key role in enhancing the national highway network.

The sector witnessed intense competition characterized by aggressive under-bidding, with certain companies submitting financial bids significantly below, often 30% to 40% lower than the authoritys estimated project costs. To curb this unsustainable trend and ensure that only serious, technically qualified and financially robust contractors participate, the NHAI introduced stringent measures. The authority reassessed its Request for Proposal (RFP) framework to tighten technical and financial eligibility criteria. Crucially, NHAI mandated the submission of additional performance security in the form of bank guarantees (BGs) for Abnormally Low Bids (ALBs). These proactive measures are designed to mitigate execution risks, prevent project abandonment or quality compromises, and ensure the timely delivery of infrastructure.

While the long-term capital outlay remains robust, the roads and highways sector is currently navigating a distinct period of moderation. As reflected in the provisional data for FY 2025-26, both the awarding and construction of national highways have tapered to a multi-year low. This slowdown in NHAI project awards is driven by a combination of strategic policy pivots and operational bottlenecks. Strategically, to manage elevated debt levels and optimize capital, the NHAI is shifting its awarding mix away from purely EPC contracts toward the PPP model. Operationally, the pace of awards has been further constrained by the introduction of stringent pre-construction prerequisites.

Certain state governments are also mirroring this approach, aiming to leverage private capital and construct state highways and expressways using PPP contracts. Driven by state-level fiscal constraints, this shift towards developer models has further shrunk opportunities for pure play EPC players.

Maharashtra:

The state is witnessing strong investment momentum in highway and expressway infrastructure, supporting connectivity and economic growth. Under Phase I of the Bharatmala Pariyojana, over 3,029 km of national highway corridors have been approved for development with a tentative capital cost exceeding 1 lakh crores. Recently, the state government approved the revised alignment of the Nagpur-Goa Shaktipeeth Expressway, increasing its length to 856.76 km, with the total project cost revised to approximately 1 lakh crores, reinforcing its strategic importance as a key economic corridor.

Uttar Pradesh:

Uttar Pradesh has developed an extensive expressway network, with over 22 expressways across operational, under-construction and planned stages. The state government is also focusing on developing link expressways, with plans to create an interconnected expressway that connects major expressways across the state.

Rajasthan:

Emerging as a key connectivity hub, Rajasthan is supported by major corridors such as the Delhi-Mumbai Expressway, Amritsar-Jamnagar Economic Corridor, Jaipur-Bandikui Expressway, and Kotputli-Kishangarh Expressway. The states plan to develop nine greenfield expressways is gaining momentum, with an estimated cost exceeding 1 lakh crores, significantly strengthening its infrastructure landscape.

Odisha:

Odisha is witnessing a significant push with the sanction of over 44,771 crores by the Centre for National and State highway projects, as well as Central Road and Infrastructure Fund projects for FY 2025-26. The State Budget 2026-27 allocated 7,500 crores under the Road Development Programme for upgrading highways, constructing bridges, and improving urban traffic flow.

Budgetary Allocation (FY 2026-27)

The Union Budget FY 2026-27 has allocated 3.09 lakh crores for road infrastructure development, marking a significant increase of ~8% over the 2.87 lakh crores allocated to the Ministry of Road Transport and Highways in FY 2025-26. Within this allocation, 1.87 lakh crores has been earmarked for the National Highways Authority of India (NHAI) to support the expansion and strengthening of the national highway network.

3.09 lakh crores

Allocated for road infrastructure in FY 2026-27 (~8% increase over 2.87 lakh crores in FY 2025-26)

Railways:

Indias railway infrastructure has witnessed significant expansion, strengthening national connectivity and serving as a core component of the countrys infrastructure transformation. Indian Railways has accelerated progress in track construction, track renewal and capacity expansion, alongside improvements in passenger services, freight capacity and safety systems such as the Kavach train protection system. A primary focus over recent years has been improving energy efficiency and reducing dependence on fossil fuels, with the railway network achieving 99.6% electrification as of Mar 2026. Going forward, the focus is shifting towards decongesting high-density networks and modernizing railway stations.

Budgetary Allocation (FY 2026-27)

The Union Budget 2026-27 has allocated a record capital outlay of 2,78,000 crores for Indian Railways, reinforcing the Governments commitment to capacity augmentation. Within this allocation, 74,471 crores has been earmarked for new line construction and doubling of existing routes, 22,853 crores for track renewals, and 5,000 crores for electrification.

Furthermore, the budget proposed a new Dedicated Freight Corridor connecting Dankuni in West Bengal with Surat in Gujarat. Spanning over 2,052 km, this corridor will integrate with the existing Western Dedicated Freight Corridor, enabling seamless movement of goods to ports along the west coast and easing pressures on passenger routes.

The announcement of seven new high-speed rail corridors, spanning nearly 4,000 km with an estimated investment of 16 lakh crores, signals a transformative shift in rail infrastructure. While the announcement of the new HSR corridors presents a massive long-term opportunity for the construction sector, these projects are in the preliminary stages. Actual commencement of construction on these routes is likely several years away, as they will require Detailed Project Report (DPR) approvals, land acquisition, and funding tie-ups, among other things.

High-Speed Rail Corridor	Key Feature
Delhi- Varanasi	Expected travel time of 3 hours 50 minutes, strengthening connectivity between the national capital and key cultural and economic centres in North India.
Varanasi- Patna-Siliguri	Estimated travel time of 2 hours 55 minutes, improving connectivity across eastern India and linking major regional hubs.
Mumbai-Pune	Expected travel time of 48 minutes, enabling high-frequency travel between two major economic centres in western India
Pune- Hyderabad	Estimated travel time of 1 hour 55 minutes, strengthening inter-regional connectivity between western and southern India.
Hyderabad- Bengaluru	Expected travel time of 2 hours, strengthening links between two leading IT and innovation centres.
Hyderabad- Chennai	Estimated travel time of 2 hours 55 minutes, supporting regional mobility and economic development across southern India.
Chennai- Bengaluru	Projected travel time of 1 hour 13 minutes, enhancing connectivity between two major technology and industrial hubs.

2.78 lakh crores

Capital outlay for Indian Railways in FY 2026-27

URBAN INFRASTRUCTURE

Metro rail network expansion in India has accelerated significantly in recent years, reshaping urban mobility, easing congestion across major cities and advancing sustainability objectives through greater reliance on mass transit systems.

As of March 2026, India has the third-largest metro network in the world, with over 1,143 Kms operational and around 936 Kms under construction across 29 cities. The sector continues to witness sustained expansion, with multiple new phases and extensions underway in Tier-1 cities such as Delhi and Mumbai, alongside the rapid development of metro systems across Tier-2 cities including Bhopal, Indore and Patna. The urban transit landscape is also evolving with the adoption of diverse and cost-efficient technologies, including Rapid Rail (RRTS), Metro Rail, and Water Metro, reflecting a broader push to enhance multimodal connectivity and expand urban mobility solutions across the country.

Recent milestones include the opening of the first section of Delhi Metro Phase IV, the commissioning of Bengalurus 19-km Yellow Line, and the progress of Ahmedabad Metro Phase II. Several projects are expected to be completed in 2026, including Mumbai Metro Lines 4, 6, 2B and 9, Pune Metro Line 3, Chennai Metro Phase II and Kochi Metro Phase II, along with further network extensions in cities such as Indore. At the same time, future expansion plans are underway through Delhi Metro Phase IV and V, Bengaluru Metro Phase III, and new metro projects in cities such as Thane and Bhubaneswar.

Operational Metro Network (in km)

City	State	Operational	Under Construction
Agra	Uttar Pradesh	5.2	24.2
Ahmedabad	Gujarat	58.7	9.6
Bengaluru	Karnataka	96.1	79.4
Chennai	Tamil Nadu	54.7	118.9
Delhi	NCR-Delhi	353.2	65.1
Gurgaon	NCR (Haryana)	12.1	28.5
Hyderabad	Telangana	69.2	0.0
Indore	Madhya Pradesh	6.2	27.3
Jaipur	Rajasthan	12.0	2.6
Kanpur	Uttar Pradesh	16.0	16.4
Kochi	Kerala	28.8	10.5
Kolkata	West Bengal	73.4	31.5
Lucknow	Uttar Pradesh	22.9	0.0
Mumbai	Maharashtra	80.0	121.4
Mumbai Monorail	Maharashtra	19.5	0.0
Navi Mumbai	Maharashtra	11.1	0.0
Nagpur	Maharashtra	40.0	41.6
Noida	NCR-Uttar Pradesh	29.7	0.0
Patna	Bihar	3.6	28.9
Pune	Maharashtra	33.0	33.3

Source: Golden Decade of Infrastructure Development in India with Special Reference to Metro Rail Network, prepared by Economic Advisory Council to the Prime Minister (EAC PM) in January 2026

In addition to the Metro network, India has advanced the rollout of the Regional Rapid Transit System (RRTS), a rail-based, high-speed and high-frequency network designed to connect metropolitan cores with surrounding urban clusters. Eight RRTS corridors have been identified : Delhi - Ghaziabad - Meerut, Delhi - Gurugram - SNB - Alwar Corridor, Delhi - Panipat - Karnal Corridor, Delhi - Faridabad - Ballabgarh - Palwal, Ghaziabad - Khurja, Delhi - Bahadurgarh - Rohtak, Ghaziabad-Hapur, Delhi-Shahadra- Baraut. The operationalisation of Delhi-Ghaziabad-Meerut has demonstrated the RRTSs potential to enhance regional connectivity and reduce travel time across high-density urban corridors.

Beyond mass transit railways, the broader urban infrastructure landscape is witnessing sustained investments in grade-separated infrastructure. As Tier-1 and emerging Tier-2 cities grapple with unprecedented vehicular density, municipal corporations and state development authorities are prioritizing the construction of extensive elevated corridors, urban flyovers, and complex bridge infrastructure to decongest arterial road networks. These structures are highly critical for improving last-mile connectivity and city-wide traffic flow.

While the long-term fundamentals for urban infrastructure remain highly robust, the sector is currently navigating distinct near-term headwinds. Recently, the industry has witnessed instances of urban transit projects facing deferments. Simultaneously, the competitive landscape has intensified, putting pressure on project award margins. There is a growing trend of newer entrants aggressively bidding for highly complex urban infrastructure projects. This increased competitive intensity is now spilling over into technically demanding segments such as underground metro tunnelling which traditionally possessed high entry barriers

Budgetary Allocation (FY 2026-27)

The Union Budget 2026-27 has allocated 28,740 crores for metro and mass rapid transit projects, reinforcing continued investment in urban transport infrastructure and strengthening long-term mobility planning across Indian cities.

28,740 crores

Allocated for metro and mass rapid transit projects in FY 2026-27

MARINE AND INDUSTRIAL

Indias maritime sector is playing an increasingly important role in trade and economic growth, with port-led development at the core of its infrastructure strategy. As the country progresses toward Viksit Bharat 2047, focus remains on expanding port capacity and improving logistics efficiency.

The Government continues to scale up port capacity through strategic mega-investments. The approval of the Vadhvan deep-sea port in Maharashtra, with an estimated cost of 76,220 crores and a planned capacity of 23.2 million TEUs per annum, marks one of Indias largest greenfield port development initiatives. Similarly, the proposed International Container Transhipment Port at Great Nicobar Island (Galathea Bay), with a capacity of 16 million TEUs and an estimated investment of 48,862 crores, is expected to position India as a key transhipment hub in global maritime trade. The Government is also focusing on strengthening domestic shipbuilding capabilities, with plans to invest around 3 lakh crores under the Maritime Amrit Kaal Vision 2047 to develop shipbuilding clusters and enhance global competitiveness. India aims to become a top 10 shipbuilding nation by 2030 and enter the top 5 globally by 2047.

Furthermore, aligning with the global energy transition, the Ministry of Ports, Shipping and Waterways has identified key major ports, Deendayal, Paradip, and V.O. Chidambaranar, to be developed as mega Green Hydrogen hubs. This strategic pivot will require extensive specialized marine infrastructure, including dedicated bunkering facilities, liquid cargo jetties, and expansive storage terminals, opening a new frontier for marine EPC players.

Complementing these public initiatives, the private sector is emerging as a massive driver of marine infrastructure capital expenditure. Leading private port operators are executing aggressive capacity expansion plans, investing heavily in brownfield upgrades, deep-draft berths, breakwaters, and automated cargo handling facilities. This sustained private capex is generating a robust pipeline of high-value EPC opportunities in specialized marine construction.

To diversify logistics and reduce freight costs, India will operationalise 20 new National Waterways over the next five years. This rollout starts with National Waterway-5 (NW-5) in Odisha, designed to connect the mineral-rich areas and industrial centres. Industrial construction segment is experiencing a sustained upcycle, driven by the Governments push for domestic manufacturing and private capex. Robust domestic consumption is triggering significant capacity expansion cycles across core industries providing opportunities in modernization and expansion of manufacturing and processing plants.

Despite a strong project pipeline across both marine and industrial segments, execution remains subject to significant ground-level challenges. In the marine sector, greenfield port developments and expansions are frequently subjected to protracted gestation periods. Additionally, offshore and near-shore construction remains highly vulnerable to extreme weather events and cyclones. In the industrial and broader EPC space, volatility in global commodity prices, particularly steel and cement, continues to exert pressure on project economics. Supply chain disruptions stemming from ongoing geopolitical conflicts also pose risks to the timely procurement and import of specialized heavy machinery and dredging equipment required for large-scale marine and industrial projects.

HYDRO & UNDERGROUND

Hydropower remains a cornerstone of Indias energy mix, offering a unique combination of clean generation, grid stability and long-duration storage. As of Mar 2026, the countrys installed hydropower capacity stood at 51,165 MW for large hydro and 5,171 MW for small hydro.

The governments ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030 has dramatically elevated the strategic importance of hydropower, specifically Pumped Storage Projects (PSPs). As intermittent renewable energy (solar and wind) integrates into the grid, PSPs act as massive natural batteries, balancing load fluctuations. Recognizing this, the Ministry of Power has aggressively streamlined approvals and issued the Pumped Storage Policy 2025, which exempts off-stream closed-loop projects from protracted concurrence requirements and waives interstate transmission charges. These policy shifts have catalyzed healthy private sector participation. Leading private energy developers, alongside public sector entities, are driving a massive expansion in PSP capacity. Indias energy storage requirement is projected at 62 GW by 2029-30 along with the target of achieving over 100 GW of pumped storage by 2035-36. As per the National Electricity Plan 2023 - 2032, the installed hydropower capacity is projected to reach 88 GW by 2031-32, including 26 GW from PSPs, requiring an estimated investment of 3.2 lakh crores.

Beyond power generation, the demand for complex underground infrastructure is accelerating, driven by the need to establish all-weather connectivity across Indias challenging topographies, particularly in the Himalayan and North-Eastern regions. There is a strategic push by the Ministry of Road Transport and Highways (MoRTH) and Indian Railways to construct high-altitude road tunnels, strategic rail links, and deep underground networks.

To ensure long-term water resilience and agricultural security, central and state governments are undertaking massive capital expenditure programs for water resource management. This encompasses the construction of large-scale dams, barrages, lift irrigation schemes, and extensive aqueduct networks. Significant opportunities are expected as governments undertakes initiatives to interlink rivers and modernize legacy water infrastructure.

While the project pipeline across the Hydro and Underground segment is exceptionally strong, the sector carries inherent execution risks. Projects are frequently situated in remote, ecologically sensitive, or geologically fragile terrains. During execution, contractors frequently encounter geological surprises and strict seasonal working windows. Additionally, the segment is characterized by an inherently elongated working capital cycle. Furthermore, certain state governments are increasingly favouring PPP modes for constructing select road tunnels and PSPs, which constrains the project pipeline for EPC contractors.

Water

The Government of Indias thrust on providing clean tap water to every rural household through the Jal Jeevan Mission (JJM) has significantly transformed the rural water landscape. Since its launch in 2019, tap water access has expanded from 16.7% of rural households to over 81.5%, representing 15.79 crores households, as of Mar 2026. Recognizing the scale of the ongoing works, the Indian government recently approved the extension of the program under JJM 2.0 until December 2028. This extension is backed by a massively enhanced total outlay of 8.70 lakh crores, with the central share increased to 3.59 lakh crores. The Union Budget for FY 2026-27 has allocated 67,670 crores for the mission.

However, despite the strong allocations, the sector is navigating severe execution and operational headwinds at the ground level. For FY 2025-26, while the JJM was allocated a budget estimate of 67,000 crores, actual utilization and spending dropped significantly to a revised estimate of just 17,000 crores.

Beyond rural supply, investments in urban water treatment and sewerage infrastructure are accelerating, driven by rapid urbanization and tightening environmental regulations. To address these challenges, municipal corporations are actively planning comprehensive master plans, creating a sustained demand for large-scale water distribution networks, high-capacity water treatment and sewage treatment plants.

OIL & GAS

Oil and gas remain central to Indias primary energy mix, meeting a substantial share of domestic demand across key sectors including industry, transport, household and commercial consumption. The countrys total primary energy demand is projected to nearly double from approximately 22 million barrels of oil equivalent per day (mboe/d) in 2024 to about 43.6 mboe/d by 2050 according to the World Oil Outlook 2025.

India imports over 85% of its crude oil and more than 50% of its natural gas to meet domestic fossil fuel requirements, underscoring the strategic need to strengthen upstream exploration and production while diversifying energy sources to enhance long-term energy security. India continues to prioritise energy security through policies that promote domestic production, while gradually reforming subsidy frameworks to reflect economic realities.

OPPORTUNITIES

Urbanisation

Indias accelerating urbanisation is emerging as a structural driver of infrastructure-led growth. According to the United Nations World Urbanization Prospects 2025, nearly 36% of Indias population resides in urban areas, a share projected to rise to 50% by 2050.

This demographic shift is intensifying demand for transport networks, housing, utilities and urban services. Expansion of metro rail systems, multimodal connectivity corridors, smart city initiatives, urban redevelopment programmes and affordable housing schemes are reshaping city landscapes.

For the infrastructure sector, this transition represents a sustained pipeline of opportunities across mobility, real estate, water, sanitation, sewerage and digital infrastructure, reinforcing urban development as a long-term growth engine.

Infrastructure Growth in Tier-2 and Tier-3 Cities

Indias infrastructure development is increasingly extending beyond metropolitan centres, with Tier-2 and Tier-3 cities emerging as key drivers of urban expansion, industrialisation and regional connectivity. This shift reflects evolving development priorities, supported by policy initiatives, decentralised economic activity and rising demand for urban infrastructure across emerging cities.

The Government has reinforced this transition through targeted policy support and capital allocation. The Union Budget 2026-27 has proposed the development of City Economic Regions, with planned investments of approximately 5,000 crores over five years per region, aimed at strengthening urban infrastructure, industrial ecosystems and regional economic integration. In addition, the recently approved 1 lakh crores Urban Challenge Fund is expected to catalyse nearly Rs.4 lakh crores of investments in Tier-2 and Tier-3 cities by enabling innovative urban development and promoting transit-oriented growth.

Infrastructure development in these cities is being driven by increasing demand across urban mobility, water supply, sanitation, affordable housing and logistics infrastructure. The rollout of metro systems, including Metro Rail, Metro Neo and Metrolite, along with investments in highways, regional airports and multimodal logistics parks, is enhancing connectivity and supporting economic activity beyond Tier-1 cities. Concurrently, government programmes such as AMRUT, Smart Cities Mission and Jal Jeevan Mission continue to strengthen core urban infrastructure and improve service delivery across these regions.

Public-Private Partnerships

India requires a sustained increase in infrastructure investment over the next two decades to maintain high growth and realise the vision of Viksit Bharat @2047. As highlighted in the Economic Survey 2025-26, achieving this goal will require greater private sector participation, supported by enhanced capacity for project conceptualisation and stronger confidence in risk- and revenue-sharing mechanisms, contract management, dispute resolution and project closure processes.

For pure play EPC contractors, this accelerated transition towards developer-led models presents both a structural opportunity and a strategic challenge. While this shift shrinks the immediate pool of EPC projects, it also opens new opportunities to explore partnerships with private developers. Companies can adapt by forming strategic partnerships with financial investors or maintaining strict bidding discipline by targeting highly complex, niche EPC packages.

Sustainable Infrastructure

Indias growth trajectory is increasingly intertwined with its climate commitments, placing sustainable infrastructure at the centre of long-term economic planning. The ambition to become a developed economy by 2047 must progress alongside the commitment to achieve net-zero emissions by 2070, requiring a calibrated shift toward low-carbon and resource-efficient development models.

This transition is reshaping investment priorities across renewable energy, circular economy initiatives, bio-based industries and nature-linked solutions. Infrastructure planning is progressively incorporating climate resilience, energy efficiency and lifecycle sustainability into project design and execution. Renewable power generation, integrated waste management, green building development and sustainable mobility systems are emerging as core segments of this transition.

National Monetisation Pipeline 2.0 (NMP 2.0)

The NMP 2.0 estimates aggregate monetisation potential of 16.72 lakh crores over FY 2026-30, including an estimated 5.8 lakh crores of private sector participation through asset monetisation initiatives undertaken by central ministries and public sector entities. This target is over 2.6 times the size of Phase I. In Phase I (FY 2021-22 to FY 2024-25), the Government achieved nearly 90% of the 6 lakh crores target, demonstrating strong execution and investor engagement under NMP 1.0.

Aligned with the Viksit Bharat vision, NMP 2.0 aims to accelerate infrastructure development and is expected to contribute meaningfully to Indias growth momentum.

Sector-wise NMP 2.0 Award Targets over FY 2026-30 ( Crores)

Sector	Total Monetisation Value (TMV)	Percentage of Total
Highways, Multi-Modal Logistics Parks & Ropeways	4,42,000	26%
Power	2,76,500	17%
Ports	2,63,700	16%
Railways	2,62,300	16%
Mines	1,00,000	13%
Urban Infrastructure	52,000	3%
Civil Aviation	27,500	2%
Petroleum & Natural Gas	16,300	1%
Warehousing & Storage	10,000	1%
Telecom	4,800	0.3%
Tourism	1,200	0.1%
Total	16,72,300	100%

Source: NITI Aayog

National Infrastructure Pipeline

The National Infrastructure Pipeline (NIP), launched in 2019 for projects above 100 crores, has expanded significantly in both scale and scope by March 2026. The total number of projects increased from over 6,835 in 2019 to 14,563 by March 2026, while aggregate investment nearly doubled, rising by approximately 92% to 213 lakh crores from 111 lakh crores, reflecting continued momentum in infrastructure creation and capital deployment.

Sectorally, investments remain concentrated, with logistics, energy and power, construction, and water management accounting for over 80% of total investments as of March 2026. Logistics infrastructure continues to anchor the pipeline, with cumulative investments of approximately 86 lakh crores, supported by flagship programmes such as Bharatmala and Sagarmala. Energy and power account for around 20% of total investments, with a gradual shift towards oil and gas infrastructure and energy storage. Investments in water management remain stable at around 10%, driven by ongoing government initiatives in water supply and sanitation.

Investment allocation remains geographically concentrated, with Uttar Pradesh (~10%) and Maharashtra (~9%) together accounting for nearly one-fifth of total NIP investments, reflecting higher project execution capacity and infrastructure demand in these states.

While the NIP provides unprecedented long-term visibility, the translation of these planned investments into actual, on-ground project awards remains susceptible to near-term execution bottlenecks. Protracted land acquisition processes, extended environmental clearance cycles, and occasional state-level fiscal reprioritization can defer the tendering of mega-projects.

International Expansion: Unlocking New Growth Avenues

Indian infrastructure companies are increasingly expanding their footprint in international markets, positioning overseas operations as a key driver of growth and margin expansion. This shift is supported by a combination of strong execution capabilities, cost competitiveness and experience in delivering complex projects across geographies, enabling Indian players to compete effectively in global EPC markets.

According to PTI, for certain large Indian infrastructure companies, overseas projects now account for approximately 40-50% of the total order book, reflecting a clear shift towards global diversification, particularly across sectors such as energy, transport and urban infrastructure.

Geographically, the Middle East remains a key growth market, with countries such as Saudi Arabia, the UAE, and Qatar driving large-scale investments in construction, renewable energy, and connectivity infrastructure. In addition, Africa and select European markets continue to offer opportunities. However, the volatile geopolitical landscape, particularly the ongoing conflicts in West Asia and Eastern Europe, demands a highly calibrated approach to global expansion. While the project pipeline is expansive, there are risks associated with supply chain disruptions, elevated logistics costs, and deferment of planned capital outlays. Consequently, maintaining a highly selective bidding strategy and rigorous risk assessment remain critical to navigating these international markets.

COMPANY PROFILE

Founded in 1959, Afcons Infrastructure Limited (referred to as Afcons or The Company) is the flagship infrastructure engineering and construction arm of the Shapoorji Pallonji Group, one of Indias leading diversified conglomerates. With a legacy spanning nearly seven decades, Afcons has built a reputation for delivering complex engineering, procurement and construction (EPC) projects across India and international markets. The company has delivered several challenging, first of Its kind Infrastructure projects in India and the World.

The Company operates across five core infrastructure verticals and has developed a consistent track record of execution-led performance, delivering large-scale and technically intensive projects within committed timelines. Its operating model is anchored in engineering capability, project management discipline and risk-calibrated execution. The company is well diversified with presence across core infrastructure segments and operating in multiple regions like India, Africa, Middle East, CIS, Europe.

Afcons maintains a strategic equipment base comprising heavy construction assets and specialised machinery aligned with its business portfolio. The ability to deploy and internally manage critical equipment, along with rapid mobilisation of advanced technology platforms, enhances project control and execution efficiency. This operational depth supports the Companys competitiveness in bidding for complex infrastructure mandates and strengthens its long-term growth trajectory.

Business Vertical-wise Performance - Order Book (%)

Business Vertical	Description	Order Book % (as of 31st March, 2026)
Urban Infrastructure	• Elevated & Underground Metro Works	51%
	• Bridges & Flyovers
	• Elevated Corridors
Hydro & Underground	• Dams & Barrages	23%
	• Tunnels (including large road tunnels) & Underground Works
	• Water & Irrigation
Marine & Industrial	• Ports & Harbours Jetties	15%
	• Dry Docks
	• Wet Basins
	• Breakwaters
	• Outfall & Intake structure
	• LNG Tanks
	• Material Handling Systems
Surface Transport	• Highways & Roads	9%
	• Interchanges
	• Mining-related Infra
	• Railways
Oil & Gas	• Offshore Oil & Gas	2%
	• Onshore Oil & Gas

RISK AND MITIGATION

Risks	Description	Mitigation
Economic Risk	The infrastructure and construction industry is highly sensitive to changes in the macroeconomic environment. Volatility in interest rates, inflation, currency exchange rates and governmental policy can materially affect project costs, execution timelines and profitability. Economic slowdowns, reduced public or private capital expenditure, or policy shifts may result in delays, deferment or cancellation of projects, thereby impacting the Companys financial performance and growth outlook.	Afcons mitigates economic risk through a diversified business model and a robust order book spanning India and international markets, reducing dependence on any single geography or sector. In India, the Company executes projects funded by central and state governments as well as private clients, ensuring diversified client profile. Internationally, Afcons has presence in 30 countries across Africa, the Middle East, Southeast Asia and South Asia, which helps cushion region-specific economic or political disruptions.
		The Company follows a disciplined project selection framework supported by rigorous risk assessment and structured contract management. Protective contractual provisions, including escalation and delay clauses where applicable, safeguard commercial interests. Additionally, Afcons focuses on core infrastructure segments such as metros, expressways and railways, which typically continue to attract sustained investment even during periods of economic moderation.
Environmental Risks	The infrastructure and construction sector, due to the inherent nature of its operations, is extensively impacted by environmental factors, including unpredictable natural catastrophes. Phenomena such as earthquakes, floods, hurricanes, tornadoes and fires pose significant risks, capable of disrupting active projects and creating unforeseen challenges.	Afcons adopts a comprehensive and proactive strategy to mitigate environmental risks. The company ensures that project contracts incorporate robust clauses addressing force majeure, unforeseen environmental events, and natural disasters. To safeguard its interests, Afcons maintains Contractors All Risk (CAR) insurance and other relevant policies across its project portfolio, providing financial protection against losses or damages caused by environmental incidents. This approach helps ensure business continuity and minimises financial impact.
		At the tender stage, Afcons conducts thorough due diligence and site-specific risk assessments to evaluate potential environmental and climate risks. For select projects, the company also performs detailed weather forecasting, marine and environmental studies, further strengthening safety and preparedness during execution. Additionally, Afcons implements project-specific emergency response plans to effectively manage and mitigate the impact of unexpected environmental events, minimising disruptions and prioritising workforce safety.
Geographical & International Risk	The Companys international operations expose it to a range of management, legal, tax and economic risks. These include challenges in enforcing contractual rights, exposure to foreign currency movements, compliance with local regulations and potential adverse tax implications. Geopolitical developments in certain jurisdictions may also affect project continuity and operational stability.	Afcons manages geographical and international risks through a diversified regional footprint across East and West Africa, South Asia, Southeast Asia and the Middle East, thereby avoiding concentration in any single country. Overseas project receipts are denominated in USD or Euro, reducing exposure to local currency volatility, and currency hedging is undertaken where appropriate. Comprehensive legal, tax and geopolitical due diligence is conducted during both bidding and execution stages to ensure regulatory compliance and informed decision-making.
		The Company also collaborates with established local partners, develops local talent and maintains constructive engagement with government authorities. This approach supports operational continuity, strengthens local integration and mitigates potential risks arising from regulatory or geopolitical factors.
Concentration Risk	A significant portion of the Companys order book is derived from public sector projects, including contracts awarded by central and state government agencies. Any moderation in government capital expenditure, delays in budgetary allocations or fiscal stress at the state level could affect project flow, execution timelines and working capital cycles.	Afcons addresses concentration risk through diversification across clients, sectors and funding sources. The Company executes projects for multiple central and state agencies, as well as select private sector entities, reducing reliance on any single authority. Within state-level engagements, projects are sourced from different departments to broaden exposure.
		A disciplined project evaluation framework ensures that only projects with established funding arrangements and sound financial structures are pursued, limiting exposure to funding uncertainties. The Company also undertakes projects supported by multilateral institutions such as JICA, the World Bank, ADB and AfDB, which enhances payment security and financial stability. In addition, Afcons maintains a diversified portfolio across infrastructure segments including roads, metros, railways, ports, bridges, hydro, tunnels, water supply and oil and gas. This sectoral breadth supports a balanced order book and reduces overexposure to any single infrastructure category.
Reliance on Suppliers	The Company depends on third-party suppliers for critical construction materials and specialised inputs. Disruptions in supply, price volatility or quality deficiencies could affect project schedules, operating efficiency and financial performance. External factors such as logistics constraints or geopolitical developments may further strain supply chains and impact cash flow stability.	Afcons mitigates this risk through long-standing relationships with established suppliers, supported by rate contracts that enhance price stability and material availability. Most domestic contracts incorporate escalation provisions to manage unforeseen input cost increases.
		At the bidding stage, the Supply Chain Management and Business Unit teams conduct detailed assessments of supplier capability and identify alternative sourcing options. A diversified vendor base reduces dependence on any single supplier, and periodic performance evaluations help maintain quality standards. Digital supply chain monitoring tools enable real-time tracking of procurement and logistics, allowing early identification of potential disruptions and timely corrective action.
Interest Rate Fluctuations	As a capital-intensive business, Afcons is exposed to changes in interest rates. An upward movement in borrowing costs can impact project margins, increase financing expenses and affect overall profitability and cash flow.	The Company manages interest rate exposure through disciplined treasury practices and structured financial planning. Borrowings are balanced between short-term and long-term instruments to optimise liquidity and cost efficiency. Project selection emphasises contracts with stable and predictable cash flows during the execution phase, limiting dependence on external working capital.
		Payment structures are negotiated to support project-level cash sustainability. The treasury function closely tracks interest rate movements and maintains adequate liquidity buffers to absorb potential volatility, ensuring financial resilience across cycles.
Foreign Exchange	Operating internationally, the Company is exposed to foreign exchange risk arising from transactions, assets, and liabilities denominated in currencies other than our functional currency. Overseas, the company transacts a significant portion of its business in several other currencies, primarily in U.S. dollars. Volatility in exchange rates can directly impact project revenues, procurement costs, debt servicing obligations.	The Company guided by a board approved foreign exchange policy that guides various hedging strategies. The company utilize derivative financial instruments, principally foreign exchange forward contracts and cross-currency swaps, to protect against currency fluctuations. This is complemented by continuous monitoring of currency markets, which enables timely action to safeguard profit margins and ensure financial stability.
Labour Shortage and Dependence on Contract Labour	Construction companies often face challenges in attracting and retaining skilled manpower, particularly for technically complex and time-sensitive projects. Shortages of qualified labour can affect productivity, delay project milestones and increase execution risk, especially when scaling up new projects.	Afcons addresses workforce risk through forward planning aligned with its order book. Manpower requirements are forecast in advance, ensuring timely mobilisation of skilled personnel alongside equipment and materials. The Company invests in structured training and skill development programmes for both its direct workforce and subcontractor teams. Partnerships with external training institutions help build a sustained talent pipeline. Labour welfare initiatives, including health camps, quality site accommodation and safety-linked incentives, support retention, morale and workforce productivity across project locations.
High Price of Raw Materials	Construction activity is sensitive to movements in raw material prices, particularly steel and cement. Ongoing geopolitical conflicts have exacerbated supply chain bottlenecks and induced severe price volatility in these core commodities. Escalation in input costs can compress margins and affect project viability. The exposure is more pronounced in fixed-price contracts, where the ability to pass on cost increases is limited.	Afcons manages material price risk through a combination of procurement discipline and contractual safeguards. The Company maintains long-term rate arrangements and established relationships with key suppliers to support price stability and assured availability. Most domestic contracts incorporate escalation clauses that provide protection against significant input cost increases. At the tendering stage, the Supply Chain and Business Unit teams conduct detailed assessments of material requirements and sourcing options. Historical price data and market intelligence are factored into cost estimates to enhance pricing accuracy. For fixed-price international projects, risk buffers and contingencies are built into bids after thorough evaluation. Digital monitoring tools and selective buffer inventories further support timely procurement and continuity of supply.
Failure to Qualify For or Win New Contracts	Afcons secures contracts through a rigorous competitive bidding process, with its business performance reliant on its ability to submit competitive bids and successfully secure project awards from clients.	With over 60 years of experience across diverse i nfrastructure segments, Afcons possesses the credentials and technical qualifications to independently qualify and bid for the majority of the projects. The Company leverages its extensive historical database of tendering & estimation, pricing trends and market intelligence to sharpen bid strategies and cost estimates, thereby enhancing project win rates. Regular benchmarking and cost optimisation initiatives are undertaken to ensure bids remain competitive without compromising profitability. In certain cases where Afcons targets a new market, whether in terms of geography or infrastructure sub-sector where it may lack specific PQ or as a risk mitigation strategy, the Company selectively forms JVs or consortiums with reputed domestic and international partners. Additionally, Afcons maintains continuous engagement with clients throughout the project lifecycle, offering innovative, value-added solutions that strengthen client relationships and create differentiation from competitors.
Cyber Security	Infrastructure companies are increasingly reliant on digital systems for project management, financial transactions, supply chain coordination and remote site monitoring. This growing digital footprint exposes operations to cybersecurity threats, including data breaches, ransomware attacks, system disruptions and unauthorised access to sensitive information.	The Company adopts a structured and proactive approach to managing cybersecurity risks and safeguarding its digital ecosystem. It continues to invest in strengthening IT infrastructure and security architecture, supported by continuous monitoring and periodic vulnerability assessments to identify and address potential threats. Regular awareness and training programmes are conducted to enhance employee vigilance and preparedness against cyber risks. In addition, the Company ensures compliance with applicable cybersecurity regulations and frameworks across geographies, reinforcing data protection, system integrity and operational resilience.

INTERNAL CONTROLS & ADEQUACY

The Company has an adequate system of Internal Controls, appropriate to the nature and size of the business and commensurate with the scale and complexity of its operations. The Company has implemented robust policies and procedures, which inter alia, ensure integrity in conducting its business, safeguarding its assets, timely preparation of reliable financial information, accuracy and completeness in maintaining accounting records and prevention and detection of frauds and errors.

The Company has aligned its internal controls with the requirements of the Companies Act, 2013. The statutory auditors of the Company have issued an attestation report on the Companys internal control over financial reporting (as defined in section 143 of the Companies Act, 2013).

The Company has a robust corporate governance framework, ensuring that all business activities are conducted with the highest standards of integrity and ethical responsibility, supported by an effective whistleblower mechanism. The effectiveness of this framework is continuously evaluated through multiple audit and review processes.

The Company has an effective Internal control system, which facilitates safeguarding the interests of the company and ensuring compliance with all laws and regulations. The internal control system is managed through internal audit by external professionals who perform rigorous, year-round assessments at project sites to test the efficacy of controls and drive continuous enhancement.

The Audit Committee of the Board maintains direct oversight, reviewing all significant audit findings and the corresponding corrective actions undertaken by management to ensure a cycle of constant improvement and accountability.

Financial Performance - Consolidated

Particulars	FY 2025-26	FY 2024-25	Change (%)
Revenues (in Crores)	12,322	13,023	(5.4%)
EBITDA* (in Crores)	1,439	1,662	(13.4%)
PAT (in Crores)	251	487	(48.5%)
Current Ratio (in times)	1.29	1.36	-
Debt-Equity Ratio (in times)	0.65	0.42	-
Debt Service Coverage Ratio (in times)	1.69	2.08	-
Inventory Turnover Ratio (in times)	4.08	3.49	-
Trade Receivables Turnover Ratio (in times)	3.02	3.43	-
Net Profit Margin	2.10%	3.88%	-

*Components of finance cost like bank charges and commission is added to other expenses & deducted from finance cost, thereby adjusting the calculation of EBITDA; EBITDA for FY26 excludes onetime impact of Rs. 76.51 Crores towards new labour code.

HUMAN RESOURCES

Afcons views its people as partners in progress and central to its long-term success. Guided by a commitment to developing leadership from within, the Company invests consistently in identifying, nurturing and empowering talent to ensure its workforce remains dynamic, capable and future-ready. The Company fosters a performance-oriented environment that encourages individuals to demonstrate their capabilities, recognises excellence and aligns personal aspirations with organisational objectives. Workplace safety remains a fundamental priority, reinforced through continuous training, active engagement and a strong culture of safety across all project locations.

As of 31 March 2026, the Company employed 3,730 professionals, representing a diverse blend of engineering expertise, project management capability and operational experience. With operations across more than 13 countries and a workforce comprising multiple nationalities, Afcons continues to strengthen its global talent base while fostering inclusion and cultural alignment.

During FY 2025-26, Afcons continued to invest heavily in its human capital, ensuring the workforce remains agile, future-ready and aligned with strategic business goals. Key initiatives undertaken during the year included:

• Leadership Development Programmes: Led by the Central Development Council (CDC), comprising senior management executives, the company continued to bring greater focus to organisational development by making people development a shared responsibility. Various targeted programmes were executed under the CDCs purview, including PRAGATI (Project Managers Development Programme), CMDP (Contract Managers Development Programme), and SAKSHAM (Desk Officers Development Programme). SP UDAAN, development programme for middle management, continued to be effectively managed in collaboration with the Shapoorji Pallonji Group Centre HR to nurture the next generation of leaders.

• Skill Enhancement and Continuous Learning: The

Afcons Talent Management Academy (ATMA), the Companys virtual learning academy, continued to enhance workforce capabilities. Operating on the principles of Learning, Doing and Being, ATMA fosters a culture of innovation, continuous learning and knowledge sharing. In addition, the Company continued to provide soft-skills training to site engineers, focusing on communication, conflict resolution, stakeholder management and team leadership to support effective project execution and workplace collaboration.

• Digitalisation & e-Learning Platforms: The company launched APeL 2.0 (Afcons Platform for e-Learning, a digital learning platform designed to provide employees across project sites and the Head Office with a seamless learning experience. The platform offers interactive modules, assessments and industry-relevant content to support technical and functional development. To strengthen baseline competency, engineers from ER1 to ER4 grades are required to complete designated digital learning modules aligned to their respective grades and functions.

• Employee Engagement & Well-being: The company maintained a steadfast focus on elevating engagement levels across the entire employee lifecycle. By creating meaningful, structured touchpoints from onboarding to exit, the aim is to inspire trust, encourage professional growth, and foster a deep sense of belonging at every step of an employees journey. Coupled with ongoing commitment to physical and mental well-being, these engagement initiatives ensure a balanced, motivating, and highly productive work environment for a diverse workforce.

Cautionary Statement

The Management Discussion and Analysis contains forward-looking statements, which are identified by terms such as plans, expects, will, anticipates, believes, intends, projects, estimates, and similar expressions, as defined under applicable securities laws and regulations. These statements relate to the Companys future business prospects, growth strategies, product development, market position, expenditures and financial performance. However, such forward-looking statements are subject to various risks and uncertainties, and actual results may differ significantly from those projected.

The uncertainties associated with these statements include, but are not limited to, factors such as fluctuations in earnings, challenges in managing growth, competition (both domestic and international), economic conditions in India and other target markets, the ability to attract and retain skilled professionals, potential time and cost overruns in contracts, challenges in managing international operations, changes in government policies, fiscal deficits, regulatory changes, interest rates, and general economic conditions.

Past performance should not be considered indicative of future outcomes. The Company does not undertake to announce any corrections if these forward-looking statements prove to be materially inaccurate in the future, nor does it undertake to update any forward-looking statements made from time to time on its behalf.