From metro coaches to warships, Titagarh hits the fast track

Wagon-manufacturing was never new to Kolkata. So when Umesh Chowdhary, then 23, set up Titagarh Wagons (TWL) in 1998, there was nothing exceptional to it. Neither did many take note when Titagarh made a string of acquisitions in India and abroad to aggregate technologies.

Its entry into EMU (electric multiple unit) passenger coach-making in 2010 did raise a few eyebrows. But the moment of reckoning came in 2016, when TWL lost the Nagpur metro coach tender to a State-owned Chinese firm by a ₹1-crore margin.

Unlike other Indian participants, which are either foreign-owned or have tied up with a foreign major, TWL owns its Italian technology partner Firema. “We didn’t like to be a glorified agent of a foreign manufacturer. So we went for strategic acquisitions,” said Chowdhary, Vice-Chairman and Managing Director, Titagarh Group.

Building warships

And the strategy is paying. In 2017, TWL bagged a ₹175-crore contract for manufacturing four specialised vessels for the Navy and the National Institute of Ocean Technology, defeating industry biggies such as Garden Reach Shipbuilders and Engineering, and Reliance Defence.

The ground for entry into high-value ship building was laid in 2012 with the acquisition of Corporated Shipyard, in Kolkata.

But Chowdhary is not content. “Our plan definitely is to make warships. We have already got approval for warships. It will take time. But if you look at our history, we don’t look short term,” he told BusinessLine .

With four factories each in India (three in West Bengal and one in Rajasthan) and Europe (three passenger rolling stock units in Italy and one freight rolling stock unit in France), 2,700 employees (2,100 in India and 600 in Europe), and a consolidated income of ₹1,768 crore in March 2017, Titagarh Group is emerging a key player in the railways, urban transport and defence sectors.

Apart from vessels, the group supplies nuclear and biological warfare shelters (from TWL), missile canisters (from Cimmco) and bailey bridges to the defence sector. Chowdhary expects the defence business profile to improve over the next five years.

In the railways and urban mass rapid transport segment, the company is focussing on wagon-manufacturing in India and France, and metro coach-manufacturing in India and Italy. If everything goes according to plan, the Indian business will witness exponential growth, riding both on Indian Railways’ purchases and global marketing.

Railway orders are back

After nearly a three-year hiatus, the Railways is back with rolling stock purchase orders. “In 2016-17, the Railways contributed only ₹300 crore to the group’s turnover shared between TWL and Cimmco. As of February 2018, we had a railway order book of ₹1,300 crore, most of which will be executed in 2018-19.”

One definite impact of it will be felt on Cimmco. Acquired from SK Birla Group eight years ago, the ₹122-crore wagon-maker had been making losses for the past three years, due to over-dependence on railway orders. Chowdhary expects it to break even in FY19.

He is also hopeful that the railway order book position will continue to be robust as the Railways has heavily invested in track capacity expansion and debottlenecking over the past five years. To ensure return of investments, the firm now has to acquire freight rolling stock for higher capacity utilisation.

Over and above the Indian Railways orders, Chowdhary is setting his sight on tapping the worldwide demand for rolling stock and metro coaches through Titagarh Wagons AFR of France and Titagarh Firema Adler of Italy, which will also boost Indian business.

“Our plan is to design in Europe, partly manufacture in India and finish in Europe, for marketing around the world,” he said. As part of that, the company has spearheaded a project to improve the production processes at its coach-manufacturing facility at Uttarpara, near Kolkata.

“I expect exports to be higher. But to reach that goal, we have to change a lot to be acceptable in the world market. Over the next 12 months, we will make our Uttarapara unit a centre of excellence with all standard European approvals in place.”

Improving bottomline

As of March 2017, Titagarh Group earned a consolidated net profit of ₹27 crore; EBIDTA stood at ₹140 crore.

The group’s aggressive business expansion strategy over the past 10 years has had a role to play in it. For example, in 2014, it won a coach refurbishment order for Kolkata metro at a throwaway price.

“Commercially, that contract was a disaster. But we did it to get a foothold in the sector and let my people understand what is behind a metro coach,” Chowdhary said.

While face value of acquisitions remained low, they were designed to have trailing effects. Chowdhary said the group took a €six-million (₹48 crore) hit in October-December 2017 on account of the Firema acquisition in 2015 (due to settlement of disputed contract obligations).

“We paid €one million for Firema which had a gross block of €300 million. We didn’t take any of their financial liabilities. All my acquisitions are like that. But I took other troubles. For example, Firema had an order book of €228 million; o.f this, about €180 million was disputed. We resolved each and every dispute.”

The aggregate outgo on account of settling disputed contracts of Firema was “less than 10 per cent of the gross block (€300 million)”. On the brighter side, the turnover of Titagarh Firema Adler improved from €30 milllion to €137 million in the first year of operation.

Chowdhary is not planning any fresh acquisition at this juncture. “Over the next couple of years, I will be stabilising the business.”

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