INFRASTRUCTURE – BUDGET 2023

During the budget speech, Finance Minister announced that increase in Capital investment outlay which has been raised for the third year in a row by 33% to ₹10 lakh crore, which would be 3.3% of GDP. The government will allocate ₹10,000 crore per year Urban Infrastructure Development Fund to be used for creating infrastructure.

Increase in capital expenditure and on Railway capex is a welcome measure that could trigger a lot of other investments by the private sector and stimulate income growth. Infra, capital goods and materials sectors could benefit out of this. Bond street is relieved due to borrowing estimates coming within expected levels. Further, the capital outlay of ₹2.40 lakh crore has been provided for the Railways, could benefit companies like IRCON, RVNL, and wagon manufacturing companies TWL operating into the development of railway infrastructure.

Allocation towards road outlay which has been increased 25% YOY for the current fiscal year, give new hopes for growth in the road space.  Companies with healthy balance sheets such as infra stocks PNC Infratech and KNR Constructions , NHAI remain our top picks in the sector. Given the backdrop, we argue road developers must work on segmental diversification.

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