Modi government setting track for Railway stocks

Mumbai: Despite all its problems, the Indian Railways’ freight traffic is crucial for the smooth progress of various industries and the economy at large. Understanding the significance of the Indian Railways for the overall growth of the Indian economy, the development of railway infrastructure has become the top priority of the Indian government.

Under the leadership of Modi, the government is focusing on building the Diamond Quadrilateral network for high-speed trains and revamping the worn and broken down railway network.

In the last five decades the Indian Railways have lost significant portion of their freight traffic to road due to their inherent issues.

Mr Atal Bihari Vajpayee’s government made the Indian highways world class and now it seems the Modi-led government wants to replicate the same in the railways. This will benefit all the stake holders, be it companies, government or common citizen of the nation.

As we are coming closer to the first rail budget to be presented by the new rail minister, Mr D V Sadananda Gowda, from the newly-formed government, that is expected to take benefit of the stable government and put emphasis on completing the ongoing railway projects on a fast track mode rather than being political populism and regionalism.

Mr. D V Sadananda Gowda has given some optimistic statement by saying that fund allocation in the interim rail budget by the former rail minister was far too less and with that rate of funding, project completion would take longer time.

He also indicated that the Union rail budget will strive to reduce the average implementation time required for laying a line from 50 years to 30 years. Thus, it is expected that in this budget there would be higher fund allocation for the various projects.

Moreover, Odisha Chief Minister Naveen Patnaik, in its letter to Prime Minister Narendra Modi, has urged to allocate more funds to the state in the upcoming railway budget to complete delayed projects and augment rail infrastructure in the state.

However, more than what comes from the budget, timely execution would be the key.

Companies like Texmaco Rail & Engineering, Kalindee Rail Nirman, Titagarh Wagons and Kernex Mycrosystems are the direct beneficiaries from any positive development from the budget.

Rail Budget 2014: Narendra Modi government setting track for railway stocks

Recently, Texmaco Rail & Engineering has acquired Kalindee Rail. It has given synergy to both the companies to reap benefit from the government thrust to develop railway infrastructure development.

This deal is also a sign of consolidation in the industry. Post the acquisition, Texmaco will have much larger balance sheet, enabling it to participate in the much larger projects.