PNC Infratech Ltd Management Discussions

Company Overview

Incorporated in 1999, PNC Infratech Limited has been a key contributor to Indias infrastructure development, with a strong focus on roads and highways. The Company provides end-to-end infrastructure execution capabilities, essentially offering Engineering, Procurement, and Construction (EPC) services under Design-Build turnkey contracts. It also undertakes projects through various public-private partnership (PPP) models, including on Design-Build-Finance-Operate-Transfer (DBFOT), Annuity & Hybrid Annuity Mode (HAM) and Operate-Maintain-Transfer (OMT) formats. PNC Infratech is among the few players in the sector with established expertise spanning investment, project development, construction and long-term asset management.

Leading Infrastructure Player Driven by Integrated In-House Competencies

The Company has built a strong reputation through the successful execution of a diverse project portfolio, including bridges, flyovers, airport pavements, roads, highways, expressways, industrial area development, and rural drinking water supply systems.

Backed by strong technical expertise and financial strength, the Company is well-positioned to independently undertake large-scale EPC projects. Its commitment to infrastructure development is reflected in its investments over the past five years, including significant deployment of capital in the highway sector through a mix of equity and debt.

With a substantial gross block and an extensive fleet of construction equipment, PNC Infratech has the capacity to execute large-scale projects annually, demonstrating significant operational scalability. The Company also drives cost efficiency through the ownership and leasing of quarries, ensuring a reliable and uninterrupted supply of key raw materials such as stone aggregates.

Further strengthening its execution capabilities is a highly skilled workforce, spanning design, planning, engineering, construction, operation, maintenance, traffic, environmental engineering, viability assessment, and project development and management. These teams are supported by strong functions in accounts, taxation, finance, procurement, human resources, stores, safety and security and administration, enabling the consistent and efficient delivery of high-quality infrastructure solutions.

Expanding Sectoral Boundaries Through Focused Diversification

With over two decades of technical and operational expertise, the Company is well-positioned to sustain its growth trajectory through robust risk mitigation and working capital optimization strategies. Its strategic roadmap emphasizes measured expansion into high-potential sectors such as railways, water supply and irrigation and coal mining.

While roads and highways remain the core focus, the Company is actively diversifying its project portfolio to maintain growth momentum and reduce segment concentration. The goal is to achieve a balanced mix where highways contribute approximately 60% and other sectors the remaining 40%. In recent years, this diversification has already taken shape through strategic foraying into mining, railways, metro rail, water infrastructure, transmission lines, and renewable energy with active participation in bids floated by authorities in these sectors. Notably, the Company won a Coal Mining project and a Solar Energy cum Battery Energy Storage System (BESS) project, further broadening its footprint.

Water infrastructure is expected to be a significant near- to medium-term growth driver, with increasing participation in government-led initiatives such as the Jal Jeevan Mission, Water Resource Development (Irrigation etc.) likely to enhance the order book substantially. Concurrently, efforts are underway to deepen the Companys presence in railway infrastructure.

Today, PNC Infras operations span a comprehensive range of infrastructure development, including BOT-Toll, HAM and conventional Annuity road projects, irrigation and water supply systems, industrial area development, and airport runway construction, and management/maintenance of completed projects reflecting a well-diversified and strategically expanding portfolio.

Cluster-Based Regional Focus with a Pan-India Footprint

The Company is headquartered in North India and has built an exceptional execution track record in the region, which continues to command a substantial share of its order book. While maintaining strong regional expertise, it has successfully expanded its pan-Indian footprint across multiple states, including Delhi-NCR, Uttarakhand, Karnataka, Maharashtra, Andhra Pradesh, Bihar, Uttar Pradesh, Haryana, Madhya Pradesh, Gujarat, and Chhattisgarh.

To date, the Company has executed over 100 major infrastructure projects across 16 states. These span a diverse mix with 74 road EPC projects, 23 airport runway works, 1 railway track construction, 2 power transmission projects, 1 industrial area redevelopment, and 1 water supply project.

On the asset-ownership front, PNC Infratech is currently managing 1 project under BOT-Toll, 2 under BOT-Annuity, and Fourteen HAM projects. 14 HAM projects are having an aggregate bid project cost of over 17,000 Cr

As of March 31, 2026, 5 HAM projects have achieved PCOD/COD, 6 are under construction, 1 project has achieved financial closure, and for 2 projects in which Company has signed Concession Agreements with NHAI. In addition, the Company entered two new segments during FY 2025-26 viz. coal mining and a Solar Power cum BESS transmission project further diversifying its portfolio.

Uttar Pradesh has emerged as one of Indias fastest-growing states in both urban and rural infrastructure, and PNC Infratech is strategically placed to capitalize on this accelerated development agenda. Its long-standing presence, deep understanding of the regional landscape, and cluster-based project execution model enable efficient resource allocation, stronger operational synergies, and stable margins. This focused regional strategy allows the Company to remain cost-competitive while sustaining profitability. As a dominant participant in recent project awards across North India particularly in Uttar Pradesh, PNC is well-positioned for sustainable growth and value creation in the years ahead.

Established Pre-Qualification Credentials and Enduring Government Client Relationships

With an operational legacy spanning over two decades, PNC Infratech has built deep domain expertise through sustained collaboration with both central and state government agencies. The Company has long-standing partnerships with key infrastructure authorities, including the National Highways Authority of India (NHAI), the Ministry of Road Transport and Highways (MoRTH), the Airports Authority of India, Military Engineering Services, various State Roads Development Authorities, South-Eastern Coalfields, National Hydroelectric Power Corporation and Public Works Departments.

During FY 2025-26, PNC Infratech continued to demonstrate its execution resilience by strategically managing multiple projects across diverse geographies, effectively mitigating risks while optimizing working capital management. The Companys consistent track record and proven delivery capabilities have firmly established its pre-qualification credentials for large-scale infrastructure projects. Notably, PNC Infratech possesses the financial and technical strength to independently bid for projects valued up to 10,000 Cr underscoring its ability to pursue large-size mandates without relying on consortium partnerships.

This effective combination of proven experience, healthy financials, trusted government relationships, and independent bidding capacity reinforces PNC Infratechs standing as a formidable player in Indias evolving infrastructure landscape.

Focused Financial Strategy Backed by a Growing Order Book

PNC Infratechs financial strategy is rooted in prudent cost control, balanced value offering, and a progressively stronger balance sheet creating a solid foundation to capture emerging growth opportunities in fund-based projects.

The Companys financial standing remains robust, with a standalone debt-to-equity ratio of 0.13x as of FY 2025-26, and consolidated ratio of 0.76x. To fund future HAM projects, the focus remains on internal accruals and the calibrated monetization of operational assets, ensuring growth is achieved without over leveraging the balance sheet.

This financial discipline is further supported by a healthy order book position, with the unexecuted order book standing over 18,000 Cr as of March 31, 2026.

Asset Monetization

In January 2024, the Company entered into definitive agreements with Vertis Infrastructure Trust (formerly Highways Infrastructure Trust), an Infrastructure Investment Trust (InvIT) sponsored by affiliates of KKR & Co. Inc. to divest 12 road assets comprising 11 National Highway HAM assets and 1 State Highway BOT Toll asset, spanning an aggregate length of approximately 3,800 lane-km.

The transaction was structured in two tranches. Under Tranche I, completed in May 2025, the Company, along with its Wholly Owned Subsidiary PNC Infra Holdings Limited, divested 10 HAM assets for an equity consideration of 1,827.6 Cr, subject to adjustments for certain descoped works. Additionally, around 200 Cr of other receivables since realized/to be realized over time from the respective SPVs, in accordance with the terms of the agreements.

Subsequently, in July/August 2025, the Company and PNC Infra Holdings Limited completed the divestment of their entire stake in the 11th asset BOT-Toll, PNC Bareilly Nainital Highways Private Limited, for an equity consideration of 153 Cr The total equity investment across these 11 assets stood at 1,446 Cr.

In March 2026, the Company completed the sale of its remaining asset (HAM), PNC Challakere (Karnataka) Highways Private Limited. The transaction was concluded at an enterprise value of 683.84 Cr, including 80.48 Cr received towards equity and 134.94 Cr towards unsecured loans on March 27, 2026.

The successful completion of this transaction marks a key milestone in the Companys asset monetization journey, enabling it to unlock value from its operational portfolio, strengthen its balance sheet, and enhance financial flexibility to pursue future growth opportunities.

Financial overview

PNC is one of the few companies in the infrastructure and construction space in India which has posted consistent operating cash flow/free cash flow (OCF/FCF) post interest expense over FY 2013-14 to FY 2025-26. The Company has negligible net interest expense as a percentage of EBITDA, thus having significant distributable cash flow. It has avoided unrelated diversification as well as aggressive growth campaigns.

The Standalone Revenue for FY26 stood at 4,633 Cr.

The EBITDA for FY 2025-26 is 583 Cr and the Profit After Tax for FY 2025-26 is Rs. 344 Cr.

The Companys Net Worth as on March 31, 2026, on a Standalone basis is 5,811 Cr, whereas the total debt is 741 Cr The Company has a net cash surplus of 327 Cr The debt-to-equity ratio for FY 2025-26 is 0.13x.

The current ratio, which indicates the Companys ability to pay short-term obligations, has remained strong at 2.68x for FY 2025-26, as compared to 2.36x for FY 2024-25.

During the year, CARE Ratings Limited has reaffirmed its rating to AA+ with a stable outlook for the long-term facilities and A1+ for the short-term bank facilities of the Company.

On a consolidated basis, the revenue for FY 2025-26 stood at 5,368 Cr In terms of segment contribution, the Roads EPC segment contributed approximately 76% Water Segment contributed 11% whereas the Toll/Annuity Income contributed 13% for FY 2025-26.

The Consolidated EBITDA for FY 2025-26 is 1,137 Cr and the Consolidated Profit After Tax for FY 2025-26 is 832 Cr.

The Companys net worth as on March 31, 2026, on a Consolidated basis is 6,813 Cr, whereas the total debt is 5,151 Cr The Net Debt to Equity on a Consolidated basis is 0.76x.

Risks and Mitigation Mechanism

Competition Risk

The Company faces competition from a wide range of local, national, and international players across its operating segments, with intensity varying by geography and project type. Competitive pressures remained elevated in FY 2025-26, driven by multiple government initiatives being smaller in size, including relaxed bidding norms. This heightened competition may result in aggressive bidding, potentially exerting pressure on contract pricing and operating margins.

Mitigation

Backed by over three decades of experience in construction and engineering, the Company has built a strong execution track record. It strategically focuses on large-sized projects (even over 5,000 Cr value), where competitive intensity is relatively lower. Supported by a robust balance sheet and deep domain expertise, the Company delivers integrated solutions spanning design, engineering, planning, and execution. This enables efficient delivery of complex projects with an emphasis on safety, timeliness, and cost optimization. Additionally, PNC aims to accelerate project completion timelines to benefit from early completion incentives, where applicable.

Geographical Concentration Risk

The Companys operations are largely concentrated in North India, with a significant exposure to Uttar Pradesh. Such geographic concentration exposes it to region-specific regulatory and political risks, which could impact project execution and overall business performance.

Mitigation

To mitigate this risk, the Company is proactively diversifying its presence across geographies and sectors. It is expanding into new states while also venturing into emerging segments such as irrigation, railways, metros, transmission lines, and renewable energy. With a proven track record of successful engagements with multiple state governments, the Company is well-placed to scale its operations in new regions. Additionally, it optimizes the use of its extensive construction equipment fleet by deploying resources efficiently across nearby project sites, enhancing operational flexibility and execution efficiency.

Cyber Risk

With increasing digitalisation of operations, exposure to cyber threats such as ransomware, phishing, and other malicious activities has risen significantly across industries. As IT systems play a critical role in project execution and the deployment of technology-driven solutions, any disruption could adversely affect operational efficiency and business continuity.

Mitigation

While the Company has not encountered any cyber incidents so far, it adopts a proactive and vigilant approach to cybersecurity. It has implemented comprehensive safeguards and systems to strengthen its cyber resilience and continuously monitors evolving threat landscapes. This ongoing assessment helps ensure robust protection of its digital infrastructure and minimizes potential vulnerabilities.

Inflation Risk

The macroeconomic environment and infrastructure sector have been facing sustained inflationary pressures, primarily driven by rising input costs. Critical materials such as structural steel, cement, bitumen, fuel, concrete, metal plates, cables, and other electrical and mechanical components have witnessed notable price increases, which may adversely impact the Companys cost structure and margins.

Mitigation

The Company follows a proactive and structured approach to manage input cost volatility, which is critical for efficient project execution. It retains control over key cost components through ownership of strategic assets and long-term procurement arrangements, including its own stone aggregate mines and crushers, which are major contributors to optimize overall project costs.

Additionally, the Company sources essential raw materials such as cement, steel and bitumen from established manufacturers with whom it has longstanding relationships, ensuring reliability in quality, timely availability, and competitive pricing.

To further mitigate the impact of cost fluctuations, the Company incorporates price-escalation clauses in contracts with government clients. These provisions enable adjustments linked to changes in input costs, thereby helping protect margins throughout the project lifecycle.

Liquidity/Cash Flow Risk

The risk that the Company may be unable to meet its short-term and long-term financial obligations due to potential mismatches in cash flows.

Mitigation

The Company maintains a strong financial position with adequate liquidity buffers to service its debt obligations. It follows a disciplined approach to budgeting and closely tracks project-level cash flows, costs, and funding requirements. In addition, it actively monitors both micro and macroeconomic trends, enabling timely and informed financial decision-making.

Commodity Price Volatility Risk

Volatility in the prices of key construction inputs, particularly bitumen, fuel, steel and other petroleum-based materials, may increase project costs and create pressure on project margins. Global geopolitical developments and fluctuations in crude oil prices may further amplify input-cost volatility, potentially impacting cost management and execution profitability.

Mitigation

The Company leverages contractual price-escalation mechanisms to provide protection against fluctuations in key input costs. For applicable HAM/EPC projects, any price escalation received by the SPV is passed through to the EPC contractor on a back-to-back basis, thereby limiting the Companys exposure to commodity price inflation. In addition, the Company closely monitors input prices and procurement requirements to facilitate timely sourcing and support effective project cost management.

Human Resource Management

PNC Infratech places strong emphasis on continuous skill development and capability enhancement across its teams. The senior management is largely homegrown, bringing deep, grassroots-level expertise in engineering, procurement, project management, and execution. The Company also fosters a culture of accountability by supporting its employees through both motivational initiatives and performance-linked incentives.

Internal Control Systems

The Company has established robust internal control systems aligned with the scale and complexity of its operations. These systems ensure that assets are procured efficiently, safeguarded against unauthorized use or loss, and that all transactions are duly authorized, accurately recorded, and properly reported. The internal audit function strengthens these controls through well-defined policies, procedures, and periodic reviews. Audits are conducted across functions as per an annual audit plan, with findings regularly reported to management and the Audit Committee. The effectiveness of internal controls is further validated through inputs from statutory and ISO auditors. Additionally, project sites are secured through advanced CCTV surveillance, and operations are supported by an integrated SAP ERP system, enabling continuous monitoring and improvement by management.

Cautionary Statement

The Company has included forward-looking statements and information in this Annual Report to help investors understand its growth potential and make informed investment decisions. This Report, as well as other written and oral comments made by the Company on a regular basis, contains forward-looking statements that outline expected outcomes based on managements plans and assumptions. Forward-looking statements are predictions of future events based on certain assumptions. Risks, uncertainties and assumptions all play a role in achieving such outcomes. The quality, reliability and completeness of market data and information acquired from numerous published and unpublished reports and sources cannot be guaranteed. PNC Infratech does not undertake to make any announcements or amend any developments or forward-looking statements made by or on behalf of the Company if any of the economic scenarios, industry developments or forward-looking statements become materially inaccurate in the future.