SPML Infra Limited (NSE: SPMLINFRA) the infrastructure developer reduced its legacy debt burden to ₹317 crore while securing ₹4,324 crore in new water and irrigation contracts. Despite improved quarterly profitability, analysts maintain a cautious stance due to high leverage and a negative five-year sales growth rate.
The company reported a 20.4% year-on-year increase in standalone revenue to ₹231.1 crore for the third quarter of FY26. The company’s performance was characterized by a significant expansion in margins and a sharp reduction in its legacy debt, which fell from ₹700 crore to ₹317 crore. While the company has secured a substantial order book, it continues to face fundamental challenges, including a below-average quality grade and a mildly bearish technical trend.
Debt Resolution & Order Inflows
The primary driver of the company’s recent financial shift is the aggressive resolution of its legacy debt through a Master Restructuring Agreement with NARCL. Outstanding debt has been reduced to ₹317 crore, which now carries zero interest outgo and no immediate repayment pressure on cash flows. This restructuring is supported by ₹621 crore in arbitration awards already in hand, with further claims of ₹4,417 crore currently filed. Simultaneously, the company secured new order wins totaling ₹4,324 crore, primarily in the water and irrigation sectors.
Infrastructure & Energy Storage
SPML Infra is currently executing several large-scale government-funded projects. Key projects include a ₹1,438 crore Jal Jeevan Mission (JJM) project in Rajasthan and a ₹1,073 crore water supply project under the AMRUT 2.0 scheme in Indore. Most of these new contracts include long-term Operation & Maintenance (O&M) components spanning 10 to 20 years to provide recurring revenue. Additionally, the company is pursuing a strategic tie-up with Energy Vault for Battery Energy Storage Systems (BESS) to enter the utility-scale renewable integration market.
Financial Performance
For the quarter ended December 31, 2025, SPML Infra reported the following standalone results:
- Revenue: ₹231.1 crore, up 20.4% from ₹191.9 crore in Q3 FY25.
- EBITDA: ₹26.3 crore, an increase of 85.2% year-on-year.
- EBITDA Margin: 11.4%, reflecting a 400 basis point expansion.
- Net Profit (PAT): ₹20.5 crore, a 97.1% increase year-on-year.
- PAT Margin: 8.9%, up from 5.4% in the previous year.
On a nine-month basis (9M FY26), revenue remained relatively flat with a 0.4% dip to ₹594.0 crore. However, PAT for the same period rose 27.7% to ₹47.9 crore. The company’s net worth improved from ₹509 crore in FY24 to ₹934 crore by December 2025, following a preferential allotment of ₹346 crore. Despite debt reduction, the debt-to-equity ratio remained high at 5.07x as of December 2025, though improved from 7.20x in FY24.
Investment Thesis: (Bull vs. Bear)
Bull Case:
- Substantial Order Book: The ₹4,324 crore in new wins provides strong revenue visibility for the coming fiscal years.
- Balance Sheet De-leveraging: The conversion of debt to interest-free status and the expected conversion of ₹1,500 crore in further arbitration claims into awards could provide significant liquidity.
- Strategic Positioning: The company is a pre-qualified EPC player in a sector seeing ₹84,000+ crore in government outlays for FY26-27.
Bear Case:
- Weak Long-Term Growth: Net sales have a five-year compound annual growth rate (CAGR) of -4.91%, highlighting long-term operational struggles.
- Profitability and Efficiency: The company’s return on equity (ROE) averages 2.31%, indicating low efficiency in generating value from shareholders’ funds.
- Pledged Shares: 25.29% of promoter shares are pledged, creating potential downward pressure on the stock price in volatile markets.
Technical Analysis
The technical outlook for SPML Infra is currently mildly bearish. As of February 16, 2026, the stock has experienced a decline of 13.24% over the past three months and 33.06% over the past six months. While the year-to-date return is positive at 5.78% and the one-year return is 11.16%, these figures trail broader market performance and reflect high volatility. Analysts have assigned the stock a ‘Sell’ rating, noting that the mildly bearish technical sentiment aligns with fundamental concerns regarding leverage.
Balance Fragility
A pledged promoter stake of 25.29% increases the investment risk profile of SPML Infra Limited by heightening sensitivity to share-price movements and reinforcing balance-sheet fragility. In adverse market conditions, lenders may liquidate pledged shares if collateral thresholds are breached, potentially accelerating stock volatility. This risk is amplified by the company’s elevated leverage, with an average debt-to-equity ratio of 3.55x, leading sources to characterize the financial trajectory as “positive but fragile” and more exposed to market instability.
The pledged equity and high leverage are cited as key factors behind cautious investment views, including ‘Sell’ recommendations, where risk considerations are seen as outweighing valuation support. Accordingly, the company’s risk profile calls for heightened investor prudence and due diligence, particularly for those focused on sustainable growth. Offsetting this, promoters have infused capital to support liquidity, ₹190 crore via a recent preferential allotment and over ₹160 crore across the past three years, framed by management as evidence of a promoter-backed turnaround despite the overhang from pledged shares.
Strategic Pivot
Management’s strategy, termed “SPML 2.0,” focuses on converting government budget allocations into order inflows by leveraging EPC qualifications in the water sector. The company intends to use its recently raised cash liquidity of ₹463 crore to bid for larger projects and strengthen its project execution capacity. Future growth is projected to come from the accelerated tenders in the JJM and AMRUT schemes and the expansion into the energy sector via BESS technologies.
Competitive Landscape
India’s infrastructure sector continues to benefit from elevated government spending, with more than ₹10 trillion earmarked for water and sanitation projects over the coming years. Within this landscape, SPML Infra Limited competes with sector specialists such as VA Tech Wabag and large diversified EPC players including Larsen & Toubro, KEC International, and Dilip Buildcon. While SPML’s order wins are meaningful relative to its scale, they remain materially smaller than those of larger peers, with L&T reporting quarterly inflows of ₹50,400 crore.
From a credit perspective, the company’s recent [ICRA] BBB- (Stable) rating reflects a moderate degree of safety while underscoring its ongoing recovery from a period of elevated financial stress. The rating indicates improving fundamentals but also highlights the company’s relatively weaker balance sheet compared with larger EPC peers, positioning SPML as a smaller, higher-risk participant in a sector dominated by well-capitalized incumbents.