KNR Constructions sees FY28 recovery potential as recently won orders enter execution

Investment View and Valuation

Motilal Oswal Financial Services retained its Neutral rating on KNR Constructions and its sum-of-the-parts-based target price of Rs 130, compared with a CMP of Rs 129. The broker reported that the company again missed its estimates by a wide margin in 4QFY26 as execution slowed amid a thin executable order book. It expects recently won projects to contribute meaningfully to execution only from FY28.

Weak 4QFY26 Operating Performance

KNR Constructions reported standalone 4QFY26 revenue of about Rs 535 crore, down 37.1% year on year but 16% above Motilal Oswal's estimate of Rs 464 crore. EBITDA declined about 76% year on year to Rs 28.3 crore, materially below the broker's estimate of Rs 46 crore. EBITDA margin contracted 850 basis points year on year to 5.3%, compared with the estimated 9.9%.

Adjusted profit after tax fell about 74% year on year to Rs 19.2 crore, against the broker's estimate of Rs 27.8 crore. The board recommended a dividend of Rs 0.25 per share. For FY26, revenue, EBITDA and adjusted profit after tax declined about 35%, 66% and 73%, respectively.

Road Awards and Execution Outlook

Management said FY26 road-sector awards were muted. MoRTH and NHAI award conversion remained slow despite an approximately Rs 3.5 trillion pipeline, owing to extended approval timelines and land-acquisition challenges. KNR Constructions also faced margin pressure from heightened competition. However, tighter NHAI RFP norms could reduce competition by favouring technically and financially stronger contractors.

As of March 2026, the order book was about Rs 8,670 crore, including Rs 3,550 crore from the mining project and excluding a recently won HAM project worth Rs 3,230 crore. Excluding mining, the order book is executable over 18 to 24 months.

Government projects represented 84% of the order book, comprising 80% state-government and 2% central-government projects, while captive HAM projects accounted for 16%. KNR Constructions had bid for projects worth Rs 4,500 crore as of FY27. Management guided for FY27 order inflows of Rs 8,000 crore to Rs 10,000 crore, revenue of about Rs 2,000 crore and an EBITDA margin of 10% to 11%.

Mining Project and Strategic Initiatives

Management expects the Vemardi coal mine in Jharkhand to begin operations by 2HFY27. The project was won in 1QFY26 through a 74:26 joint venture with NCC and is valued at Rs 4,800 crore excluding GST. It is expected to generate Rs 300 crore to Rs 400 crore of revenue when fully operational.

KNR Constructions plans to explore metro, railway, BOT toll and solar opportunities through joint ventures. The company had infused Rs 730 crore of the revised Rs 952 crore HAM equity requirement, leaving Rs 220 crore to be infused.

The company also signed agreements with Indus Infra Trust to sell four SPVs for total consideration of Rs 1,540 crore, compared with equity investment of about Rs 566 crore. Completion was expected by September 2026.

Working Capital and Receivables

Working-capital days improved to 78 days in 4QFY26 from 93 days in FY25, helped by higher creditor days. However, debtor days remained elevated because of delayed payments related to Telangana irrigation and HAM projects.

• Telangana government receivables stood at Rs 1,450 crore as of March 2026.
• Unbilled irrigation revenue was about Rs 800 crore as of March 2026.

Broker Estimate Changes and FY28 Recovery Potential

Motilal Oswal reduced its FY27E and FY28E estimates as follows:

The broker forecasts revenue and EBITDA CAGR of 22% and 45%, respectively, over FY26 to FY28E, supported by the low FY26 base. Its FY28E forecasts are revenue of Rs 3,106 crore, EBITDA of Rs 373 crore and adjusted profit after tax of Rs 228 crore.