- Ajax reported a 31% volume plunge – but the sector shows early signs of recovery.
- Solar, irrigation and rural‑road projects are emerging as demand anchors.
- Margins stayed flat in FY26; analysts expect a 5‑7% price hike in FY27.
- Buy rating retained at INR 770 with upside potential if cash‑flow constraints ease.
- Competitors like Tata Projects and JCB are already positioning for a rebound.
You’re overlooking a hidden catalyst that could reverse Ajax Engineering’s steep volume decline.
Most market participants see the 31% dip as a death knell, yet the same data also highlights a narrow window where demand is beginning to re‑emerge. The infrastructure sector is still wrestling with cash‑flow bottlenecks caused by delayed state payments, but specific sub‑segments—solar installations, precision irrigation and rural‑road upgrades—are gaining momentum. If you can connect the dots now, you’ll position yourself ahead of the price‑rise wave projected for FY27.
Why Ajax Engineering’s Volume Slump Mirrors a Sector‑Wide Weakness
The construction‑equipment arena has been hit by a confluence of macro‑factors. State‑run projects, which traditionally fund the bulk of heavy‑equipment orders, are stalled due to election‑year budgeting pauses. This cash‑flow pinch has forced contractors to postpone procurement, resulting in a sector‑average volume contraction of roughly 30% in the last twelve months.
Ajax’s 31% decline is therefore not an outlier; it aligns closely with peers such as JCB India (‑29%) and Tata Hitachi (‑32%). The uniformity suggests a demand‑side shock rather than a company‑specific flaw. However, unlike its peers, Ajax has maintained a disciplined cost base, limiting the impact on profitability.
How Solar, Irrigation & Rural Roads Could Fuel Ajax’s FY27 Recovery
Three niche segments are quietly offsetting the broader slowdown:
- Solar Power: The government’s accelerated renewable‑energy targets have spurred a surge in solar‑farm construction, demanding earth‑moving and material‑handling equipment. Vahan data shows a 12% month‑on‑month rise in equipment registrations for solar projects in February 2026.
- Irrigation: New water‑conservation policies have unlocked funding for micro‑irrigation schemes, especially in Maharashtra and Karnataka. These projects require compact excavators and loaders—core product lines for Ajax.
- Rural Roads: The Pradhan Mantri Gram Sadak Yojana (PMGSY) has been re‑budgeted for FY27, promising an additional INR 8,000 crore in contracts. Road‑building translates directly into higher demand for back‑hoe loaders and bulldozers.
Collectively, these segments could deliver an incremental 4‑6% lift in Ajax’s order book by the end of FY27, assuming cash‑flow bottlenecks ease.
Competitor Landscape: What Tata Projects and JCB Are Doing Differently
Tata Projects, a major equipment integrator, has already secured several solar‑farm contracts by bundling financing solutions with its machinery. This approach mitigates the cash‑flow issue for contractors, effectively creating a captive demand channel. JCB, on the other hand, has introduced a “lease‑to‑own” model that reduces upfront capital expenditure for state agencies.
Ajax’s current strategy remains product‑focused, but the research report highlights an upcoming “financial‑services arm” slated for launch in Q3 FY27. If executed, this could level the playing field with Tata and JCB, allowing Ajax to capture a share of the financing‑driven orders.
Historical Parallel: The 2015 Infrastructure Slowdown and Its Aftermath
Back in 2015, India’s infrastructure sector faced a similar demand crunch after the GST rollout stalled state funding. Equipment manufacturers saw volume drops of 28‑35% across the board. Those that survived did so by two key moves: aggressive price restructuring in FY16 and diversification into renewable‑energy projects.
Companies that implemented price hikes in FY16 posted an average margin expansion of 6% in FY17, while peers that stayed price‑static saw margins compress further. Ajax’s planned price increase in FY27 mirrors this historic playbook, suggesting a repeatable recovery pattern.
Technical Corner: Understanding Margin Compression and Price‑Hike Levers
Margin compression occurs when input costs rise faster than selling prices, eroding profitability. In a low‑demand environment, manufacturers often refrain from raising prices to avoid losing market share, which is exactly what happened in FY26 for Ajax.
The price‑hike lever is a strategic tool that firms pull once demand stabilises. By modestly increasing average selling prices (ASP) — typically 3‑5% — companies can restore gross margins without sacrificing volume, provided the market perceives the value proposition as justified.
ICICI Securities projects Ajax to lift ASP by 5% in FY27, leveraging the higher‑value contracts emerging from solar and road projects. This move is expected to lift EBIT margins from 8.2% to roughly 12%.
Investor Playbook: Bull vs Bear Cases for Ajax Engineering
Bull Case
- Cash‑flow constraints ease as state budgets are cleared post‑election, unlocking delayed orders.
- Solar, irrigation and rural‑road pipelines accelerate, delivering a 4‑6% order‑book uplift.
- Successful rollout of Ajax’s financing arm enables price hikes without volume loss.
- EBIT margin expands to 12% in FY27, driving EPS growth of 18% YoY.
- Stock re‑ratings push the target price to INR 950, offering >20% upside from current levels.
Bear Case
- State payments remain delayed, further throttling contractor cash‑flows.
- Competitive financing solutions from Tata and JCB capture the majority of high‑margin contracts.
- Price hikes trigger order deferrals, pushing margins back to sub‑8% levels.
- FY27 earnings miss forecasts, leading to a downgrade to “Hold” and a target price drop to INR 680.
Given the current valuation at INR 770, the bull scenario presents a compelling upside, while the bear scenario outlines the risks to monitor.
For the complete research report, click here.