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BL Research Bureau

After the heightened expectations in the run up to the Railway Budget, the announcements made on Friday may have come as a dampener.

With no roll back of the increase in freight charges, the Budget did not provide much of an impetus, on the lines expected by Corporate India. But it does spell positively on companies associated in the business of making railway-related goods.

Companies such as BEML, Texmaco and Titagarh Wagons that are in the business of making wagons, EMU and metro coaches stand to benefit from the announced addition of 18,000 wagons (as against 11,000 in FY09) to Indian Railways’ fleet in the current year.

The announcement of new train services, refurbishment of older coaches and the intended introduction of high-capacity air-conditioned double-decker trains will also bode well for these wagon manufacturers.

The setting up of a new coach factory for manufacturing 500 coaches a year in Kanchrapara in West Bengal may not pose significant competition to the players as the Railways (according to industry estimates) is expected to acquire 1,00,000 wagon units in the 11th Five Year Plan.

Such a high wagon procurement target may result in all the players getting meaty orders.

That the planned investment outlay by the Railways has been increased to Rs 40,745 crore is also a positive for other railway-related stocks. The budget has increased its allocation (compared with the one made in the interim budget) for new lines from Rs 1,100 crore to Rs 2,921 crore.

The provision for gauge conversion has also been upped 24 per cent to Rs 1,750 crore. This would benefit companies such as Kalindee Rail Nirman, Kernex Microsystems and Stone India that are involved in providing ancillary products and services to the Indian Railways.

But as a good number of these railway-related stocks had run up on expectations prior to the Budget, the upside from here on may not be as significant as before.

The budget has also mildly sweetened the deal for container rail operators – such as Container Corporation, Gateway Distriparks and Arshiya International – with its announcement for granting permission (to container rail operators) to access private sidings.

This will not only help these operators better their transit time (turnaround time), it will also help them attract traffic that’s not otherwise carried by the Railways. Besides, the proposed roadmap to get these operators to set up freight terminals and logistics park may also help, albeit only in the long run.

In addition, even though the budget did not spell out definitive plans for taking the dedicated freight corridors forward, that the Ministry continues to focus on it also reflects well for these container operators.

Players such as Concor and Gateway Distriparks, given their cold chain initiatives, may also benefit from the proposed development of cold storage facilities for farmers to store vegetables and fruits.

More Stories on : Stocks | Railway Budget

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