KEC, Afcons and 3 Other Infra Companies Have Massive Order Backlogs, but Margins Are Under Pressure; What’s Causing It?
A large order book is usually viewed as a sign of strong future revenue visibility for an infrastructure company. Yet the June 2026 quarter showed why backlog size alone cannot explain earnings performance.
Five infrastructure companies – Ahluwalia Contracts, KEC International, IRCON International, Afcons Infrastructure and G R Infraprojects – reported sizeable order books, but all five saw year-on-year contraction in EBITDA margins during Q1 FY27. The extent ranged from 120 basis points at KEC to 430 basis points at Ahluwalia Contracts. The key question is therefore not simply how much work these companies have secured, but how quickly that work can be executed and at what margin.
Why Is the EPC Industry Facing Margin Pressure?
The recent weakness is not the result of a collapse in infrastructure demand. It is largely an execution and cost-cycle issue. First, the sector has experienced slower project awards and execution, particularly in roads. ICRA said FY26 construction growth was affected by slower awarding and execution activity, along with an early and elongated monsoon. It expects construction-sector revenue to grow 6–8% in FY27, supported by a healthy aggregate order book of more than 4.2x operating income.
Second, land acquisition, payment delays and project readiness can leave contractors with an order but without a fully available work front. ICRA has also highlighted awarding restrictions and land-acquisition challenges in roads, leading to greater competition and weaker margin performance among road-focused EPC companies.
Third, commodity and supply-chain costs remain important. CRISIL expects large diversified EPC companies to see revenue growth accelerate to 9–10% in FY27, but also warns that commodity inflation and geopolitical supply-chain disruptions could soften profitability.
Finally, competitive bidding structurally limits pricing power. Civil construction can attract intense competition, which keeps tender pricing aggressive and makes cost overruns more damaging to margins.
Massive Order Books, but Lower Margins
| Company | Order Book | Q1 FY27 EBITDA Margin | Q1 FY26 | YoY Change |
| Ahluwalia Contracts | ₹20,664 Cr | 4.30% | 8.60% | -430 bps |
| KEC International | ₹40,000+ Cr* | 5.80% | 7.00% | -120 bps |
| IRCON International | ₹23,366 Cr | 13.60% | 17.10% | -348 bps |
| Afcons Infrastructure | ₹43,290 Cr | 9.60% | 13.00% | -340 bps |
| G R Infraprojects | ₹25,319 Cr | 11.02% | 12.65% | -163 bps |
Ahluwalia Contracts recorded ₹1,125.8 crore of turnover in Q1 FY27, up 12% YoY, but EBITDA margin dropped to 4.29% from 8.59%, while PAT fell nearly 78% to ₹11.4 crore. Its unexecuted order book stood at ₹20,663.5 crore as of June 30, 2026.
The decline was unusually company-specific. Management said the finalisation of the AIIMS Jammu bill reduced the project’s bill value by ₹29 crore, with an estimated 2.6% impact on EBITDA. Execution in West Bengal and Assam was also affected by SIR-related activity and elections, increasing indirect project costs. More importantly, labour rates in the NCR region rose sharply, with management citing 35–40% increases in minimum wages across skilled and unskilled categories. Higher staff costs due to project mobilisation added another layer of pressure.
2. KEC International: Backlog Is Strong, Execution Is the Problem
KEC entered FY27 with an order book and L1 position of more than ₹40,000 crore, while Q1 revenue remained broadly flat at ₹5,024 crore. However, consolidated EBITDA declined to ₹291 crore from ₹350 crore, and margin fell to 5.8% from 7.0%. PAT declined 42% to ₹73 crore.
Management attributed the weaker quarter to continued geopolitical disruption in the Middle East, labour shortages and calibrated execution of water projects because of payment delays. It also highlighted delayed legal closure of disputes and claims in transportation and metro projects as a profitability drag.
This highlights an important EPC problem: an order does not automatically become revenue. Availability of work fronts, labour, materials, and customer payments ultimately determines execution velocity.
3. IRCON: The Margin Story Is More Complicated
IRCON’s order book stood at ₹23,366 crore, of which ₹17,989 crore was in railways and ₹3,747 crore in highways. Consolidated Q1 FY27 operating revenue rose 9.5% YoY to ₹1,955.8 crore, but EBITDA declined 14% to ₹278.7 crore, taking the reported EBITDA margin to around 13.6% versus 17.1% a year earlier.
The major weakness came at the consolidated level, where joint ventures swung from a profit of about ₹19 crore to a ₹13.36 crore loss, while finance costs rose sharply. Thus, IRCON’s case points less toward a pure parent-company execution problem and more toward consolidated project/JV performance and financing pressure.
4. Afcons Infrastructure: Lower Revenue Diluted Margins
Afcons reported the largest order book among the five at ₹43,290 crore, with ₹13,219 crore of fresh order inflows in Q1 FY27. However, total income declined 20.3% YoY to ₹2,727 crore, while EBITDA fell 41% to ₹263 crore and margin declined to 9.6% from 13.0%.
Management commentary indicated that several projects did not have adequate work fronts during the quarter because of execution-related issues, including land availability. The company also saw a sharp change in revenue mix, with overseas revenue falling to roughly 16% from around 30% in March. With revenue lower, fixed overheads were spread over a smaller execution base, hurting reported EBITDA margins even though management indicated that margins on progressing projects remained healthy.
5. G R Infraprojects: Strong Execution, But Higher Costs
G R Infraprojects delivered strong revenue growth, with standalone revenue from operations rising 32.7% YoY to around ₹2,423 crore. However, EBITDA margin fell to 11.02% from 12.65%, while the order book stood at approximately ₹25,319 crore.
Management attributed the margin decline primarily to higher consumption and material costs. It also reported working-capital days rising to 148 days from 128 days at FY26-end, mainly because of higher debtor and inventory days. Three projects worth around ₹7,250 crore were also awaiting appointed dates at the time of the Q1 discussion, showing how project commencement can affect order-book conversion.
Industry Tailwinds Remain Strong
Despite these pressures, the infrastructure opportunity remains substantial. The Union Budget 2026–27 proposed ₹12.2 lakh crore of public capital expenditure, up from ₹11.2 lakh crore in the FY26 budget estimate. The government also announced plans involving high-speed rail corridors, freight infrastructure and other connectivity projects.
The National Monetization Pipeline 2.0 also envisages monetisation opportunities of ₹16.72 lakh crore between FY2026 and FY2030, with large allocations linked to highways, railways, power and ports.
More recently, India’s infrastructure output grew 4.8% YoY in August 2026, with cement production rising 12.5% and electricity generation increasing 11.6%, indicating that underlying infrastructure activity remains firm.
What Should Investors Watch?
The next phase for these EPC companies will depend less on simply adding orders and more on converting backlog into profitable revenue. Key variables include execution speed, work-front availability, labour costs, commodity prices, claims and arbitration outcomes, customer collections and working-capital days.
The industry therefore presents a mixed picture: order-book visibility remains strong, but the quality and profitability of that backlog are becoming increasingly important. The companies that can improve execution, protect project economics and reduce working-capital intensity should be better positioned to convert India’s infrastructure spending cycle into sustainable earnings growth.
