Titagarh Wagons, Texmaco to diversify amid stagnant orders from Railways

While Texmaco is focussing more on railway EPC and Railway Electrification, Titagarh is eyeing the international market

KOLKATA: Faced with stagnancy in wagon orders from Indian Railways recently, private wagon majors like Texmaco Rail Engineering Ltd (TREL) and Titagarh Wagons Ltd (TWL) are changing their product mix and market strategy to keep up with the changing times as well as de-risk themselves from Indian Railway.

TREL is focussing more on railway EPC (engineering, procurement and construction) and railway electrification — the specialities brought into the company after the acquisition of Kalindee Rail Nirman (Engineers) Ltd and Bright Power Projects (India) Pvt. Ltd. TWL on the other hand, is focussing more on exposure in the international market after the buyout in Titagarh Firema Adler SpA in Italy and a 50:50 joint venture with the French Matiere SAS. Also, its subsidiary, Titagarh Wagons AFR, in France, post the acquisition of Arbel Fauvet Rail in 2010, had given the company exposure to African countries.

The metro projects are a key area for both these companies. While TREL is focussed on EPC projects in Ahmedabad, Nagpur and Mumbai and also exploring opportunities in neighbouring countries as well as in the Middle East and African countries, TWL is eyeing the projects in Indonesia, Malaysia, Bangladesh and others apart from the ones in India. However, for TWL, the focus is on car body, bogies, metro train and others.

“The Kolkata metro refurbishment project is also a major one”, Umesh Chowdhury, managing director at TWL said.

Serious about the global prospects in metro railway projects, TWL had acquired Titagarh Firema Adler SpA, which is a focussed metro railway player for over 100 years.

A second prospect at home, which both these companies are eyeing is the Linke Hofmann Busch (LHB) coaches. Faced with quality issues, the current railway minister, Piyush Goyal has stated that the existing coaches will be replaced with the LHB variety which is safer.

Chowdhury is optimistic that once this vertical opens up, it can compensate for the stagnancy in wagon procurement from the Indian Railway.

As part of the diversification plan, TWL is also branching off into defence and shipbuilding after amalgamating its ship building subsidiary with itself. Recently, it has bagged a Rs. 175 crore order from the Indian Navy to build four vessels. Also, it has won a $ 9 million order from Nepal for supply of 30 Modular Bridges with 15 Launching Kits and 20 containers which the company will build using the technology procured via its French joint venture with Matiere SAS.

The derisking strategy and international exposure not only helped TWL maintain an order book of Rs. 2,300 crore of which, Chowdhury says, 70 per cent are through its Italian and French ventures, but also helped it increase the consolidated net income in the last fiscal year by 79 per cent at Rs. 1739.19 crore.

Wagons and coaches, taken together, continue to dominate the company’s earnings, operating margins as well as the profitability. Last year, wagons and coaches taken together, accounted for 95 per cent of the topline while the profitability from this vertical jumped 182 per cent at Rs. 71.51 crore on a consolidated basis.

TREL’s order book, on the other hand stands at over Rs. 2,800 crore, of which, EPC accounts for 1,900 crore, coaches and locomotive orders stands at 550 crore and orders in the heavy engineering division is pegged at Rs. 400 crore.

Five years ago, TWL’s dependence on the wagon business was 100 per cent which is close to 15-20 per cent currently. Chowdhury expects the revenue contribution from wagons to go up to 25-30 per cent. For TREL, while wagons accounted for 75 per cent of the revenue five years back, it is les than 50 per cent currently and is expected to fall to 25 per cent in the next five years.

“We are emerging as a major railway EPC company from a wagon builder and the focus is going to be majorly on EPC contracts now”, A. K. Vijay, chief financial officer and executive director at TREL said.

During 2016-17, the Indian Railways floated tenders for 12,277 wagons of which TREL emerged as the lowest bidder for 12,277 wagons. However, the Railways chose to re-tender a part quantity of 2500 of wagon of which the company managed to get the order for 1338 wagons. Nevertheless, it accused that Railways failed to maintain continuity of free steel supply resulting in low production during the year.

This fiscal year, however, the Indian Railway is yet to float any tender for wagon procurement. Nevertheless, Vijay is optimistic that next month, the contract for 9,500 wagons will be finalised which will mean an opportunity of atleast Rs. 237.50 crore and the completion of the dedicated freight corridors will revive wagon demand in the country.