Sept. 14 (Bloomberg) -- IVRCL Infrastructures & Projects Ltd., bidding to build a tunnel in the Himalayas on the world's second-highest road for cars and trucks, said full-year profit may rise 40 percent as India increases spending on public works.

Net income will probably climb to 2 billion rupees ($49 million) in the year to March 31 from 1.41 billion rupees a year earlier, Chairman E. Sudhir Reddy said in a Sept. 12 phone interview from Hyderabad, India, where the company is based. Sales will rise by more than half to 34 billion rupees, he said.

IVRCL Infrastructures, Larsen & Toubro Ltd. and other Indian construction companies are rushing to win orders as the government boosts spending on roads, utilities and ports. India estimates it needs to invest $475 billion in public works by 2012 to sustain economic growth that's the fastest of any major country's except China.

``The huge spending on various infrastructure projects is offering mammoth opportunities to construction companies,'' said Sanjay Sinha, who manages the equivalent of $3.6 billion in stocks, including IVRCL Infrastructures, at SBI Funds Management Ltd. ``That's translating into strong order books and driving growth at these companies.''

IVRCL Infrastructures's shares have risen 49 percent in the past year, more than three times the pace of India's benchmark Bombay Sensitive Index, and lifted the company's market value to 49.4 billion rupees. The stock declined 1.9 percent to 373.4 rupees at the 3:30 p.m. close on the Bombay Stock Exchange today after rising as much as 2.9 percent earlier in the day.

High Road

The builder has tied up with Fomento de Construcciones & Contratas SA, Spain's third-biggest construction company, for the $350 million tunnel project on Rohtang Pass, said S. Ramachandran, the company's deputy director for project development. The pass, at a height of 13,400 feet (4,111 meters), links the two valleys of the northern Indian state of Himachal Pradesh.

``We will continue to get more orders in the new spending plan of the government,'' Reddy said. ``We expect replacement of old and aging infrastructure to offer a huge business opportunity.''

IVRCL Infrastructures has an order backlog of about 95 billion rupees and will be bidding for another 180 billion rupees worth of contracts in the next 12 months, Reddy said.

The company's first-quarter profit almost doubled to 379.6 million rupees on sales that rose 58 percent to 6.8 billion rupees.

Foreign Investment

Accelerating profit growth at Indian builders has attracted overseas investments. HSBC Global Investment Funds (Mauritius) Ltd., a unit of HSBC Holdings Plc, raised its stake in IVRCL Infrastructures to 5.2 percent this month. Citigroup Global Markets Private Ltd. has a 7.25 stake, Ramakrishna Rao, IVCRL's company secretary, said in an interview.

Blackstone Group Holdings LP, Citigroup Inc. and 3i Group Plc have set up funds to invest in Indian infrastructure. Last month, Blackstone Group LP invested $150 million in Nagarjuna Construction Co.

Inadequate levels of infrastructure investment are estimated to be holding back India's economic growth by as much as 2 percent a year, according to the government. Highways, which move almost 80 percent of the goods in India, account for only about 2 percent of the country's 3.32 million kilometers (2.1 million miles) of roads.

Indian ports take 10 times longer to unload cargo than in Hong Kong or Singapore and a 13 percent power shortage during peak hours forces companies to have their own power plants.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

Last Updated: September 14, 2007 07:14 EDT