Stagnant since listing, Afcons stock faces its first post-IPO test this week

The clock is ticking down to 2 May, which marks the end of the six-month lock-in period for pre-IPO investors. With early investors free to sell their holdings from Friday, the market could see an increased supply of shares, which could weigh on the stock price in the near term.

According to Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research, Afcons's stock could see selling of up to $914 million as early investors become free to exit their positions.

In a tough business, Afcons stands out

The operating environment for infrastructure companies in India, especially EPC contractors, is challenging. It is a low-margin, high-volume business that requires a lot of working capital. Any delays in executing projects or making payments could seriously affect profitability and return ratios. These challenges make it particularly difficult for Indian EPC companies to maintain steady growth.

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Having said that, analysts believe Afcons is among the few contractors in the infra space that has consistently delivered steady growth over a long period. What sets Afcons apart from its peers, according to Nuvama analysts, is the company’s ability to deliver consistent growth while simultaneously reducing its leverage.

“Its order intake and order book increased at a CAGR (compound annual growth rate) of 17-18% each over FY06-9MFY25. Similarly, over FY06-24, the company clocked a revenue CAGR of ~18% and, more importantly, a PAT CAGR of ~29%," said a 6 March report by Nuvama Institutional Equities.

Earnings visibility

As of 31 December, the company had a ₹38,000 crore worth of pending orders, which excludes about ₹10,662 crore worth of lowest bids (L1). Afcons booked orders worth ₹14,603 crore in the first nine months of FY25.

The company has already secured a ₹1,283-crore order from DP World, taking its current order book to nearly ₹16,000 crore. With an additional ₹10,662 crore in L1, Afcons is on track to surpass ₹30,000 crore this year, with more tenders expected to open soon, the company said in its most recent earnings call on 18 February.

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“And at the end of the year, we will be somewhere between ₹45,000 crore to ₹50,000 crore order book, giving us more than 3x visibility for the future. This will clearly give revenue visibility for the next couple of years," Paramasivan Srinivasan, managing director of Afcons Infrastructure, said on the earnings call.

The company’s book-to-bill ratio improved to 3.1 in the first nine months of FY25 from 2.3 in FY24, according to an investor presentation. This is a crucial ratio for infrastructure companies as it compares future order inflows with current revenue. A high ratio signals strong revenue visibility and growth potential, while a low one may indicate slowdowns or challenges in winning new projects.

High concentration risk & rich valuation

With a hefty order book on its plate, timely and efficient execution is key for the company to convert orders into meaningful revenue and sustain growth. Ankita Shah, vice-president, institutional equity research at Elara Capital, noted that the top five projects accounted for 40% of Afcons's total order book, so any slowdown in these projects could weigh on its execution pace and revenue booking.

Still, Afcons commands a premium valuation compared to peers such as KNR Constructions, PNC Infratech and H.G. Infra, largely because it has a diversified portfolio, unlike its mostly road-focused rivals. Its pivot toward higher-margin segments such as marine and industrial projects, urban infra (including underground and elevated metros), and hydro and underground works is also giving investors more confidence, Shah said.

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According to Bloomberg data, Afcons stock trades at 21.8 times estimated FY26 earnings—significantly higher than its peers such as PNC Infratech (16.15 times), KNR Constructions (15.09), and H.G. Infra (11.37). Shah noted that Afcons’s higher multiple was in line with L&T’s core engineering and construction business, which also trades at a multiple of 22.

Afcons shares were trading around ₹425.60 on Tuesday morning, up 0.75% on the day. The stock is down about 9% over the past month and down 13% since its listing in November.