Umesh Chowdhary, VC and MD, Titagarh Wagons Ltd, shares his business outlook in a chat with ET. Excerpts:
ET: Based on how third quarter bookings have been, and the order flow inflow for the quarter four is looking like, how better is the second half expected to be compared with the first half?
Umesh Chowdhary: The last six or eight quarters have been extremely subdued and weak primarily because there was a complete lack of decision making in the government and the private wagonspending had also dried down completely.
After the new government has come in and particularly after the new railway minister has assumed charge, we have seen a lot of traction taking place.
Railways have started to ease up the processes in order to take speedy decisions and, more importantly, the private wagon demand has started coming up. So obviously, we are hoping that the second half of the current fiscal should be better than the first half because the benchmark in itself was extremely low.
Having said this, the real result of all this action, which is being taken by the railways and the government, will start showing results over the next six to 12 months time-frame and that is what I am keeping an eye on. It will be important how the new policy initiatives taken by the minister and the government pan out.
ET: Can you also take us through how the domestic versus your export revenue mix is expected to shape up over the next four to six quarters?
Umesh Chowdhary: Historically, we had almost negligible export sales. In the last 12 to 24 months, we have started export business, but it has not been very sizable. What we have done is that we are working very closely with our French subsidiary and we are taking advantage of the technology that is available with it. With low cost manufacturing, we are building products to get into the African market.
So going forward, this is going to be a big potential for us and particularly with the francophonies that are there, there is huge French specifications or the UIC specifications and we believe that this can really culminate into a sizable portion of our revenue over the next few years.
As far as the immediate future is concerned, we are in active negotiations and discussions with a number of customers for some orders. I am definitely hopeful that we would have a quantum jump in our export revenue in the coming year.
ET: According to reports, you may end FY15 with exports of Rs 50 crore. In FY16, this number could double to Rs 120 crore and your French subsidiary will be instrumental for this. Can you explain how you are tapping into the Middle East and African markets?
Umesh Chowdhary: We have not given any numbers out. So they are more like estimates or conjectures, I would say.
Yes, the French subsidiary is going to play a big role in terms of giving us market access and technology access.
What we have mentioned is that our export turnover in the past 12 months has been about Rs 60 crore and we are obviously looking to take a quantum jump for FY16. I would not give out any number of the export revenue that we will be able to get in FY16 or FY17, but yes, that is a thrust or a very focussed segment for us. We are hoping that compared to the benchmark of say Rs 50-60 crore that we have done in the last 12 months, we would be able to do much more and would not be targeting incremental but a quantum jump.
ET: Given that in the first half, the operating profit was nothing to shout about and now we are seeing some capacity utilisation, quality of orders improving across the Indian Railways — particularly from private players and exports, what kind of Ebitda growth and margins you are aiming for?
Umesh Chowdhary: As far as the Indian railway orders are concerned, which you would have seen in our second quarter results, we have had to take an exceptional hit of almost odd Rs 16 crore. This was because the orders that came in were extremely remunerative and this happened because there was a drying up of orders for a long period of time and the entire industry was sitting and starving.
So, it was an almost desperate act by some of the players in the industry who quoted prices which were unrealistic and unremunerative. As per the accounting standards and keeping in line with our own corporate governance standards, we decided that rather than booking this loss quarter after quarter, we will take a hit at one go and that is what we did in the second quarter. For the other side of the business is concerned — all our private businesses or our export or our coaches or our defence — I would say on a blended basis, an EBITDA margin of plus/minus 15 per cent, plus/minus a per cent or two, is what we are going to be targeting going forward.
ET: What is the update on strategic as well as technological tie up for high speed rail? At what stage do talks stand and would you also be interested in a financial partnership?
Umesh Chowdhary: It would be very premature to comment on what kind of partnership we would be looking there, but just to give you a background, what we are doing in coach is today we are one of the largest private sector coach manufacturers in India.
In fact, we are the largest private sector coach manufacturers in India. We are doing EMUs. We have capacity to do two to three rakes of EMUs a month. We have a capacity to do 50 coaches a month and we have taken up a ontract to refurbish some coaches of the Kolkata Metro as well.
We believe it is going to be a very big future growth market as the metro coach manufacturer and the monorail manufacturer.
So, we are in dialogue with a few people on worldwide context. We essentially need a technology partner because of the whole prequalification criterion that is specified by the metro railways in their tenders and also, we do not think that we are as of now equipped to reinvent the wheel.
We would be going in for a technology partnership with somebody or the other. Hopefully, we will get a good partner, but what that form of partnership would be, it is too premature to say.
ET: And finally, what are your expectations then from the upcoming Rail Budget?
Umesh Chowdhary: A lot of them. This time, the railway budget is a very looked forward to kind of event and we are hoping that a lot of opening up of the mindset will take place in the railways. I do not mean privatisation of the railways.
I think the Prime Minister has been very forthright in talking about no privatisation of railways, but it is more partnership with the private sector in the railways. There are so many people, who have invested in the railway infrastructure like the container train operators. They have had so many issues particularly with respect to long-term policy being absent. So we are hoping that a regulator will actually come in. We saw some phenomenal decisions being taken in the railways in the last few days. The delegation of power has been completely transformed. (Courtesy: Economic Times)