Synopsis: KNR Constructions fell 53% due to the NH-66 collapse in Kerala, leading to NHAI debarment and operational setbacks. Recovery depends on settling penalties, resuming bids post-November 2025, and order inflows rebounding
Known for its expertise in infrastructure and road development projects, the company has recently seen a sharp 53% fall in its stock price. This article explores the reasons behind the decline and whether the company can recover from this significant drop in investor confidence.
KNR Constructions Limited’s stock, with a market capitalisation of Rs. 4,563 crores, fell to Rs. 162, hitting a low of up to 2.86 percent from its previous closing price of Rs. 166.78. Furthermore, the stock over the past year has given a return of 48.8 percent.
What Happend?
The debarment issue began after a structural collapse on the Ramanattukara–Valanchery stretch of National Highway 66 in Kooriyad, Malappuram, Kerala. The project, awarded in 2019 to KNR Ramanattukara Infra Private Limited (a subsidiary of KNR Constructions), was being built under a hybrid annuity model by the National Highways Authority of India (NHAI). The incident happened close to project completion and raised questions about the handling of soft soil conditions at the site.
On May 22, 2025, NHAI announced the debarment of the companies involved. KNR Ramanattukara Infra Private Limited was barred from participating in current and future NHAI bids due to the structural failure. The project’s independent engineering consultant, Highway Engineering Consultancy (HEC), was also debarred for similar reasons, as both parties were held responsible for lapses in construction and site management.
Settlement and Resolution
The settlement agreement between KNR Ramanattukara Infra Private Limited (KRIPL) and the National Highways Authority of India (NHAI), signed on October 16, 2025, ended the dispute related to the NH-66 project. NHAI agreed to lift the debarment on KRIPL and its promoters and dropped all penalty proceedings. In exchange, KRIPL and its promoters agreed not to participate in NHAI bids until November 30, 2025, creating a temporary “silence period” for compliance.
As part of the agreement, KRIPL will build a 377-meter viaduct at its own expense, aiming to complete it by February 28, 2026, including a 90-day grace period for any delays. NHAI also granted an extension for project completion without charging liquidated damages.
A provisional completion certificate for the rest of the project (excluding the viaduct) was issued on July 18, 2025. This settlement resolves the issue, allowing KRIPL to resume normal operations after the silence period while ensuring infrastructure quality without prolonged litigation.
Management Outlook
The company management is targeting order inflows of Rs. 8,000 to 10,000 crore by the end of FY26. About Rs. 5,000 crore of this is expected from NHAI projects, mainly under the hybrid annuity model (HAM), and Rs. 3,000 to 4,000 crore from state government projects. After the settlement with NHAI over the Kerala issue, KNR and its promoters will avoid participating in NHAI bids until November 30, 2025, after which their bidding for NHAI projects will resume.
For the second half of FY26, KNR guides revenue of Rs. 800 to 900 crore on a standalone basis. The company aims for a normalized EBITDA margin of 13–14% on new orders, although Q2 margins were affected by some one-time factors. This outlook shows KNR’s focus on strengthening its order book and operational performance amidst market challenges.
Q2 Financial Highlights
The company reported revenue of Rs. 646 crore in Q2FY26, a sharp decline from Rs. 1,945 crore in Q2FY25, reflecting a YoY contraction of 66.8%. Compared to the previous quarter (Q1FY26: Rs. 613 crore), revenue grew by 5.4% QoQ. Profit for the quarter stood at Rs. 105 crore, down 81.9% YoY from Rs. 580 crore in Q2FY25, but showed 14.63% QoQ decline from Rs. 123 crore in Q1FY26. The slowdown in both top and bottom lines highlights significant operational challenges year-on-year.
Despite the weak earnings, the company trades at a P/E ratio of 4.78, substantially lower than the industry average of 19.9. This deep discount suggests the market is pricing in continued uncertainty or expects a turnaround. The steep YoY declines in revenue and profit contrast with a slight QoQ improvement in sales, indicating some stabilization but persistent pressure on profitability.
Written By Fazal Ul Vahab C H
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