Companies

Jupiter Wagons bets big on backward integration

Shobha Roy Kolkata | Updated on October 26, 2021

Representative image   -  istock.com/unkas_photo

Also looks to add brake system manufacturing to its offerings

Kolkata-based rail wagon manufacturer Jupiter Group is betting big on backward integration and looking to add brake system manufacturing to its offerings. It has signed a joint venture agreement with a Czech company named Dako-CZ for producing brake system for passenger coaches.

According to Vivek Lohia, Director, Jupiter Wagons, the brake system is under trial by Indian Railways and they hope to get approval (for commercial roll out) by March 2022. The company has an integrated facility with cold roll forming mill which produces casting that go into manufacturing of wagons, thereby reducing dependence on purchased castings from third parties.

“We have a 20,000 tonne foundry and we produce castings that go into our wagons. Cast items constitute nearly 30 per cent of the total wagon cost. Since we have our own cold roll mill, we are not dependent on outside. We have signed a JV agreement with Dako for developing brake system. We are looking to gain competitive strength through backward integration,” Lohia told BusinessLine.

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Apart from passenger coaches, Jupiter and Dako would collaborate in the areas of design to manufacture brake systems for high speed coaches, metro coaches and freight wagons, among others. The brake market in India is estimated to be close to ₹2,000 crore and is primarily dominated by two European companies at present. The company is hopeful of grabbing a 25 per cent share of the market, moving forward.

Wagon manufacturing

Jupiter Wagons, which is one of the largest suppliers of wagons for Indian Railways, had acquired Madhya Pradesh-based Commercial Engineers and Body Builders Co (Cebbco) via a stressed assets auction in 2019.

Cebbco is primarily engaged in manufacturing of load bodies for commercial vehicles and railway freight wagon. It has six manufacturing facilities spread across Jabalpur (4 facilities), Indore, and Jamshedpur and a broad range of product offerings in the commercial vehicle and wagon space.

Jupiter and Cebbco together have a total capacity of manufacturing 6000 wagons a year. It has an order book for around 2,500 wagons, amounting to ₹700-800 crore.

“We are expecting order for additional 4,000-5,000 wagons under the recent tender announced by Indian Railways. We should have a comfortable order book position till 2023-24,” he said. Jupiter is looking to merge Cebbco with itself and the scheme of amalgamation is pending with Kolkata bench of National Company Law Tribunal (NCLT).

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“We have the Sebi approval for the merger. It is now with the NCLT and we hope to get their approval by the end of this year. Cebbco is listed on stock exchanges and post amalgamation, the merged entity will get listed. This will help enhance its presence and scale and give easier access to capital,” he said.

Cebbco manufactures tippers for medium and heavy-duty segment of commercial vehicles (M&HCV) for OEMs, OEM dealers and other customers. Some of the customers in CV segment include Tata Motors, VE Commercial Vehicles Ltd (VECV), Ministry of Defence (Vehicle Factory Jabalpur) and Mahindra & Mahindra among others.

The CV market, which was slightly subdued due to Covid induced slowdown in the last two years, is expected to pick up moving forward thereby generating a good demand from this category. The company is expecting close to ₹300 crore worth business from the CV segment as compared to ₹100 crore at present. Jupiter Group, which had recorded a turnover of ₹1,000 crore in FY21, is expecting to close this year at around ₹1,400 crore.

Published on October 26, 2021

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