01 — At a Glance
The EPC Contractor That’s Better at Asset Sales Than Road Contracts
- 52-Week High / Low₹254 / ₹117
- TTM Revenue₹2,978 Cr
- TTM PAT₹544 Cr
- Full-Year EPS (TTM)₹16.7
- Annualised EPS (Q3×4)₹14.64
- Book Value₹169
- Price to Book0.71x
- Dividend Yield0.21%
- Debt / Equity0.49x
- Order Book₹8,849 Cr
The Auditor Presents: KNR closed Q3 FY26 with ₹743 crore in consolidated revenue (-12.4% YoY), ₹103 crore PAT (-58.6% YoY), but a 28.6% ROCE — which is respectable for a roads contractor. Standalone margins hit 5.2% (ouch), driven by project execution chaos on Kerala’s NH-66. But here’s the kicker: the company just struck a ₹1,543 crore deal to monetize four HAM SPVs to Indus Infra Trust. CMP ₹117. P/E 6.05x. Trading at 0.71x book. The math screams “deep value” — if you believe roads will happen again.
02 — Introduction
Welcome to Construction: Where Margin Collapse Is a Feature, Not a Bug
KNR Constructions. Hyderabad-based. Est. 1995. They build roads, bridges, irrigation projects, and the occasional flyover that makes you question the civil engineer’s choice of coffee brand on design day. The company has executed 79 projects across 11 states, laid 8,700+ lane kilometers of asphalt, and somehow managed to stay profitable through the NPA boom, commodity crashes, and a 50% stock decline in 12 months.
In the Feb 2026 concall, management painted a picture of a sector in “moderation” — i.e., highways ministry stopped awarding projects at a pace that keeps contractors employed. The government’s capex promise of ₹12.2 lakh crore looks good on PowerPoint. The actual awards? Muted. Hence, KNR’s latest genius move: monetize your best assets to a PE-backed infra fund and use the cash to fuel a new bidding spree targeting ₹10,000–12,000 crore in order inflow by September 2026. Translation: we’re hungry, we’re under-loaded, and we’re willing to eat margin to win.
Q3 FY26 was a bloodbath. Standalone EBITDA margin: 5.2% (down from 13–14% historically). Consolidated PAT: ₹103 crore (down 59% YoY). Yet the order book is ₹8,849 crore, and after the Indus monetization closes, the company will have ₹1,500 crore in fresh ammunition. Roads may not be awarding aggressively. But KNR is positioning for the next cycle with the ruthlessness of a contractor with nothing left to lose.
Concall Intel (Feb 2026): Management admitted margins are “quite difficult” near 13–14% levels. “FY27 expect something near 9–10%.” Translation: your favourite infrastructure company is voluntarily accepting lower margins. It’s like a restaurant cutting prices in a recession. Technically sound, fundamentally depressing.
03 — Business Model: WTF Do They Even Build?
Roads, Bridges, Dams, and the Occasional Argument With Government.
KNR operates as an EPC (Engineering, Procurement, Construction) contractor in three primary verticals: roads & highways (~29% of order book), irrigation (~19%), and an oddball mining project (~40%). They execute on three models: EPC (you get paid as you build), BOT (Build-Operate-Transfer; you run it and collect tolls), and HAM (Hybrid Annuity; government pays you semi-upfront, then annuities over time).
The roads segment is their bread and butter. NHAI, state highways, national highways — they’ve done all three. The Feb 2026 concall revealed the company has ~80% of order book from state governments, ~2% from central government, and ~2% from private clients. Concentration risk? Absolutely. Dependency on government awarding cycles? Completely. That’s why, when highway awards slowed in 9M FY26 (only 1,448 km by MoRTH + 712 km by NHAI), management suddenly became very interested in irrigation (Rajasthan, MP, Odisha) and railways (yes, railways — they hired a retired railway CFO to build a new division).
Equipment? In-house. Tippers, excavators, generators — they own ₹1,443 crore in machinery. As of Q3 FY25, that was: 1,265 tippers, 394 excavators, 302 generators, and enough crushers and mix plants to supply half of Telangana’s road network. Execution track record: projects completed ahead of schedule. Early completion incentives earned: multiple. Financial discipline: actually quite strong (ROCE 28.6%, ROE 27.2%). Stock performance: down 50% in one year. Such is the life of a construction company — your balance sheet can be fortress-like while the market prices you like a distressed asset.
Roads (OB Mix)29%₹2,566 Cr
Irrigation (OB Mix)19%₹1,681 Cr
Mining (OB Mix)40%₹3,539 Cr
Executable OB (Clean)₹5,300 Crex-Mining
Mining Reality Check: The ₹3,500 crore mining order? Pristine on paper. Practical execution? Forest clearance pending. Gram Sabha approvals pending. Management’s own words: “start possible Q2 FY27 at best, practically… third quarter… [needs] another 8–10 months.” Translation: ₹3,500 crore order that won’t contribute materially to FY26 or FY27. It’s infrastructure Schrödinger’s cat.
💬 If a mining project gets an order but has no forest clearance, does it even exist? Drop your infrastructure frustration in the comments!
04 — Financials Overview
Q3 FY26: The Numbers That Explain Why The Stock Is Down 50%
Result type: Quarterly Results | Q3 FY26 EPS: ₹3.66 | Annualised EPS (Q3×4): ₹14.64 | TTM EPS: ₹16.7
| Metric (₹ Cr) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue (Consolidated) | 743 | 848 | 646 | -12.4% | +15.0% |
| Operating Profit | 167 | 256 | 193 | -34.8% | -13.5% |
| OPM % | 22.4% | 30.2% | 29.9% | -780 bps | -750 bps |
| PAT (Consolidated) | 103 | 248 | 105 | -58.6% | -1.9% |
| EPS (₹) | 3.66 | 8.84 | 3.72 | -58.6% | -1.6% |
What Happened to Standalone Margins? The company’s consolidated margins look respectable (22.4% EBITDA). But here’s the fine print: standalone (construction-only) EBITDA for Q3 FY26 was just 5.2%. Why? Multiple factors per the Feb 2026 concall: (1) Late-stage project execution drag (revenue declines but fixed costs persist), (2) An ₹20 crore cost overrun on Kerala’s NH-66 viaduct (additional costs: ₹30 crore already spent, ₹15–20 crore more to come), (3) Back-to-back subcontracting at 3–4% margin to keep equipment busy. Management expects FY27 margins “near 9–10%.” Not 13–14%. Not even 11%. The reset is structural, not temporary.
05 — Valuation Discussion: Fair Value Range
What’s This Contractor Actually Worth?
