Infrastructure and construction stocks may continue to do well in the next few years

Investment

oi-Sunil

By Sunil Fernandes

Published: Saturday, July 26, 2014, 11:56 [IST]

Infrastructure and construction stocks like Gammon Infra, IRB, Sadhbhav Engineering, Gammon India, HCC and others have been in the limelight in the last few months, as hopes of a sharp recovery in prospects for the industry gather steam. It's possible that individuals with a two to year three perspective may see their shares doubling from the current levels.

Why the prospects have brightened

In the last few years, industry has been virtually bogged down by legal hurdles, environmental issues and land acquisition related issues. That may now reduce significantly since the new NDA government has taken over.

The government is deciding to invite bids for road projects only of there has been 80 per cent of the land required, Nitin Gadkari, the country's road transport and highways minister said recently.

"Time is the most important concept in infrastructure and business, and delays cost the country Rs 15 crore a day. Files are kept pending for three months to one-and-a half years. I have asked highways officials to fast track decisions and requested the prime minister to issue directions to all officials," the Economic Times quoted Gadkari as saying.

At the moment there are as many as 189 projects aggregating Rs 1,80,000 crore stuck and the government is looking at unlocking the same. A host of measures are being taken and one can say with reasonable confidence that the sector is likely to see a big boost due to sizeable planned outlay for infrastructure including roadways.

In this year's Union Budget the investment proposed in the National Highway Authority (NHAI) and State Roads was to the tune of staggering Rs 37,880 crores, which includes Rs 3,000 crores for the North East. During the current fiscal, a target of national highway construction of 8500 km is set, according to reports in the DNA.

There Mint carried reports that Rural development minister Nitin Gadkari indicated that the government may change some provisions of the farmer-friendly land acquisition law, introduced by the previous Congress party-led government, to address concerns of the industry such as the rising cost of acquiring land and procedural delays.

All this is likely to benefit infrastructure companies, which may do well in the next few years. It may just be a good time to bet on infrastructure and construction companies like Gammon India, HCC, NCC and others.

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