Nal se Jal beneficiaries! Three water infra stocks with up to 110% upside potential; do you own any?

India’s water infrastructure sector is entering a sustained investment cycle, driven by rising water stress, rapid urbanisation, stricter wastewater and zero liquid discharge (ZLD) norms, and government funding through Jal Jeevan Mission 2.0 (JJM 2.0), Atal Mission for Rejuvenation and Urban Transformation 2.0 (AMRUT 2.0) and Namami Gange, according to an SMIFS report.

SMIFS estimates construction spending on water treatment, wastewater treatment and water supply at Rs 7.4-7.8 lakh crore during FY27-31, about 1.6 times the Rs 4.74 lakh crore invested during FY22-26. It expects wastewater treatment, reuse and industrial water to provide the largest incremental demand.

Capacity gaps support investment
India has 18 per cent of the world’s population but about 4% of its freshwater. Per-capita water availability, at 1,486 cubic metres in 2021, was below the 1,700 cubic metre water-stress threshold and is projected to fall to about 1,140 cubic metres by 2050. Sewage generation, at 70,517 million litres a day in FY20, could approach 1,20,000 million litres a day by 2050.

About 60 per cent of sewage remains untreated, compared with about 72 per cent in FY20-21. Project execution has lagged approvals. Only about 17.5 per cent of approved AMRUT 2.0 sewerage and septage projects have been completed, along with two of 133 sanctioned water treatment plants. Ganga-front towns generate 3,558.5 million litres of sewage a day against installed treatment capacity of 1,956.7 million litres.

Wastewater and industrial demand
Wastewater treatment spending is expected at Rs 3.88-4.14 lakh crore during FY27-31, compared with Rs 3.45-3.65 lakh crore for water treatment and supply. Tertiary treatment, MBR and SBR technologies, reuse and resource recovery are gaining prominence. Demand is also expected from data centres, semiconductor fabrication plants, green hydrogen, battery gigafactories, pharmaceuticals, chemicals and textiles.

SMIFS expects India’s water and wastewater treatment technology market to grow from $2.98 billion in 2025 to $5.17 billion by 2031, a compound annual growth rate of about 9.6 per cent. It said capital-light operations and maintenance contracts offer the strongest margins and lowest working-capital intensity.

Contract models and stock ratings
Contracts are shifting from EPC towards DBO and HAM models, offering longer operations, maintenance and annuity income but requiring stronger balance sheets. SMIFS estimates an organised serviceable market of Rs 3.7-4.3 lakh crore and an obtainable market of Rs 1.1-1.5 crore for listed, technically capable companies.

The report assigned buy ratings to VA Tech Wabag Ltd with a target price of Rs 2,760, Enviro Infra Engineers Ltd at Rs 360 and EMS Ltd at Rs 503, implying potential upsides of 38 per cent, 110 per cent and 63 per cent, respectively.

SMIFS remains positive on the sector but identified delays between announced outlays, fund releases and execution as the main risk, noting that JJM fund drawdown fell from Rs 69,890 crore billion in FY24 to Rs 22,540 crore billion in FY26.