Welcome to the latest edition of Hidden Gems Weekly. In recent weeks, we examined a niche power equipment manufacturer is benefiting from India’s transmission buildout, a company quietly conquering India’s industrial supply chain,a communication equipment manufacturer, a packaged food exporter building global brand buffers and a niche coatings player riding premiumisation trends. This week, we turn to a company that operates at the heart of India’s infrastructure and construction boom.
When investors think about India’s infrastructure boom, they usually think of cement companies, steel manufacturers or road builders.
That is understandable. After all, these are the businesses that visibly benefit when a new highway, railway line or industrial park comes up.
But before a bridge is built, before a metro pillar is erected and before a factory installs a heavy machine, something else has to happen. The material has to be lifted, shifted and positioned.
That is where cranes come in. And that makes Action Construction Equipment, better known as ACE, one of the more interesting ways to play India’s capital expenditure cycle.
Action Construction Equipment Ltd (ACE) Ltd 1-Year Share Price Chart
The company may not grab headlines like some of the larger infrastructure names, but it occupies a critical position in the economy. If India is building more roads, warehouses, factories, ports, defence infrastructure and urban projects, somebody has to supply the machines that make that construction possible.
ACE has quietly become one of the biggest beneficiaries of this trend. The company is the world’s largest manufacturer of pick-and-carry cranes and commands around 63% market share in India’s mobile crane segment and roughly 60% in tower cranes.
Where ACE Makes Its Money
| End Market | Revenue Exposure |
| Manufacturing & Logistics | 45% |
| Infrastructure | 35% |
| Real Estate | 13% |
| Agriculture | 7% |
Beyond cranes, it also manufactures construction equipment, material handling equipment, forklifts, telehandlers, backhoe loaders, tractors and harvesters. Its products find applications across manufacturing, logistics, infrastructure, real estate, defence and agriculture.
Yet despite operating in sectors receiving significant government support, the company’s performance over the last few quarters has been far from spectacular. The obvious question is why.
Why The Last Few Quarters Were Disappointing
To understand ACE’s recent performance, investors need to look beyond the headline numbers.
The first reason was the transition to Stage V emission norms for Construction Equipment Vehicles. As in the automobile industry, when emission standards became stricter, construction equipment manufacturers had to upgrade their products. This led to higher machine prices.
As a result, many customers advanced purchases into FY25 before the new norms took effect. Management has acknowledged that FY25 benefited from substantial pre-buying ahead of the emission transition.
The consequence was simple. Demand that would normally have appeared in FY26 had already been pulled forward.
The second issue was slower project mobilisation. While government announcements on infrastructure spending continued, activity on the ground was slower than expected in several pockets. Extended monsoons, geopolitical uncertainty and delays in project starts weighed on equipment demand through much of the year.
The third challenge emerged just when demand started improving. Steel prices rose sharply. Since steel accounts for roughly two-thirds of ACE’s cost structure, rising input costs created margin pressure and forced the company to take multiple rounds of price increases. Management indicated that steel prices had risen more than 20% from January levels.
These factors combined to create a year that looked weaker than what investors had become accustomed to.
The Numbers Tell The Story
For FY26, ACE reported revenue of Rs 3,391 crore, compared to Rs 3,427 crore in FY25. While revenue remained largely flat due to a slowdown in industry demand following the transition to new emission norms, profitability continued to improve. EBITDA rose to Rs 614 crore from Rs 606 crore, while EBITDA margins expanded to 18.1% from 17.7% a year earlier.
More importantly, the company has undergone a remarkable margin transformation over the last four years. EBITDA margins have expanded from just 9.9% in FY22 to 18.1% in FY26, reflecting a combination of operating leverage, better product mix, pricing discipline and an increasing focus on higher-value equipment. Few capital goods companies have managed such a sharp and sustained improvement in profitability over this period.
Chart: Margin Transformation Story
| FY23 | FY24 | FY25 | FY26 | |
| EBITDA Margin (%) | 11.9 | 16.1 | 17.7 | 18.1 |
Net profit increased to Rs 415 crore from Rs 409 crore in FY25 despite the challenging environment.
The quarterly numbers reveal the same trend.
The quarterly numbers tell a similar story. Revenue in Q4FY26 rose to Rs 1,023 crore from Rs 969 crore in the corresponding quarter last year, an increase of 5.6%. EBITDA stood at Rs 166 crore, while net profit came in at Rs 111 crore. Although margins moderated due to higher commodity costs and geopolitical disruptions towards the end of the quarter, ACE still delivered its highest-ever quarterly revenue.
What stands out is not the growth itself but the resilience of profitability. Even in a year marked by industry normalisation and input-cost volatility, ACE expanded margins and delivered record earnings. That suggests the company is evolving from a cyclical equipment manufacturer into a business with stronger pricing power, better operating leverage and a more diversified revenue base.
The Defence Opportunity Is Becoming Real
One of the more important developments at ACE over the last few years has been its entry into defence. The company currently has a defence order book of around Rs 575 crore. Management expects defence revenue contribution to rise from roughly 3% of revenue in FY26 to about 5-6% in FY27.
At first glance, that may not seem meaningful. However, defence has characteristics that investors generally like. Orders are large, visibility is better, competition is lower and margins tend to be more stable than in conventional construction equipment.
ACE’s Emerging Defence Business
| Metric | FY26 |
| Defence Revenue Contribution | ~3% |
| FY27 Management Expectation | 5-6% |
| Defence Order Book | ₹575 crore |
More importantly, India’s push towards indigenisation in defence manufacturing is creating opportunities for domestic suppliers that did not exist a decade ago. For ACE, defence is gradually becoming a second growth engine alongside infrastructure.
The KATO Partnership Changes The Equation
Another significant development is ACE’s joint venture with KATO Works of Japan. The two companies have formed a 50:50 joint venture focused on truck cranes, crawler cranes and rough terrain cranes. The partnership combines ACE’s manufacturing and distribution capabilities with KATO’s heavy crane technology.
This is important because the heavy crane market has traditionally been dominated by foreign players.
The joint venture provides ACE access to technology, localisation opportunities and export markets that would have been difficult to build independently. It also positions the company to participate in the higher-value end of the crane market, where realisations and margins tend to be stronger.
A Balance Sheet Built For Growth
One of ACE’s biggest strengths is something investors often overlook.
The company has virtually no debt. Its debt-to-equity ratio stands at zero. Return on Capital Employed is 31.7% while Return on Equity is 22.9%.
Return on Capital Employed and Net debt to equity
These are impressive numbers for a manufacturing company operating in a cyclical industry. Even more interesting is the fact that ACE’s blended capacity utilisation across cranes, material handling and construction equipment is only around 60%.
In other words, the company can grow meaningfully without immediately undertaking large capital expenditure projects. That creates operating leverage. When volumes improve, profitability can grow faster than revenue because a large portion of the fixed cost base is already in place.
What Could Drive The Next Phase Of Growth?
The broader backdrop remains favourable. Government capital expenditure continues to remain elevated. Manufacturing investments are increasing. Warehousing demand is growing. Logistics infrastructure is expanding. Defence spending is rising.
These are all end markets where ACE already has a presence. Management has also indicated that tower crane demand remains healthy and order books are full. The company expects stronger contributions from exports and defence over the coming years.
At the same time, the company has introduced new-generation cranes featuring artificial intelligence-enabled safety systems and advanced telematics, helping it move up the value chain.
The result is a business that is no longer dependent solely on cyclical volume growth.
The People Running the Show
Promoters own 65% of the company, which means they have plenty of skin in the game and stand to gain or lose alongside other shareholders. Equally important, none of the promoter shares are pledged, removing a common red flag that often surfaces in smaller companies.
The board includes a mix of executive and independent directors, providing oversight as the business expands. Over the years, management has focused on building capacity, strengthening market position and allocating capital conservatively rather than chasing growth at any cost.
In a market where governance concerns can quickly erode investor wealth, the combination of high promoter ownership and a clean shareholding structure offers an additional layer of comfort.
Is The Valuation Attractive?
At the current market price of around Rs 931, ACE trades at roughly 26.7 times earnings. That is not cheap in absolute terms.
However, the market is paying for something. It is paying for a business that combines market leadership, strong return ratios, a debt-free balance sheet and exposure to multiple structural growth themes.
The stock has also corrected significantly from its highs over the past year as investors worried about slowing growth. The question now is whether FY26 represented a temporary pause or a permanent slowdown.
The evidence so far suggests it was a pause. Demand disruption caused by the emission transition appears to be behind the company. Defence is scaling up. The KATO partnership opens new opportunities. Capacity utilisation remains comfortable. And India’s infrastructure and manufacturing ambitions remain intact.
For investors looking beyond the next quarter, ACE represents a relatively uncommon combination in the Indian market: a dominant industrial franchise with strong balance sheet strength and multiple avenues for growth.
Sometimes the best way to invest in a construction boom is not through the companies pouring concrete. It is through the company supplying the machines that move it.
Disclaimer:
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article. The website managers, its employee(s) and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary