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Budget 2021 has pegged Railways’ capex for FY22 at a record ₹2.15 lakh crore, up by 34 per cent compared to the capex announced for FY21. This is, however, much lower than the projections of ₹3.08-lakh crore, as per the National Infrastructure Pipeline (NIP) report, for the said fiscal. The budgeted capex for FY21 – ₹1.61 lakh crore – too was lower than as fixed by NIP at ₹2.62 lakh crore.
The companies in the sector were severely impacted in the first half of FY21 as the capital expenditure by the Railways languished during the period due to the outbreak of Covid-19. The Railways’ capex has been slowly picking up in the latter part of current fiscal and with higher budgetary allocation for FY22, all eyes will be on the execution aspect.
Stocks in focus
A higher allocation of about ₹21,049 crore towards construction of new lines, doubling of lines, and gauge conversion for FY22, is expected to help rail PSUs such as Rail Vikas Nigam (RVNL), which is involved in rail infrastructure required by the railways.
And focus on conventional metro for Kochi, Chennai, Bengaluru and Nagpur cities and new technologies — ‘MetroLite’ and ‘MetroNeo’ — in the Budget may benefit Wagon and coach manufacturers such as BEML and Titagarh Wagons. Indian Railways’ (IR) budgetary allocation to rolling stock increased more than thrice to ₹6,815 crore, when compared to revised estimates of FY21.
The Budget also stated that 100 per cent electrification of broad-gauge routes will be completed by December 2023. In this space, one can look at Siemens – one of the players helping IR in electrification.
The Indian Railway Finance Corporation (IRFC), a public sector enterprise and the dedicated market borrowing arm for the Indian Railways, appears to be placed well to reap benefits of increase in off-budget borrowings of IRs. The extra budgetary resources funding of IRs for FY22 is planned to be a lakh crore, which is 20 per cent up compared to that of the previous year.
Meanwhile, investors need to watch out for private players who will be participating in IR public-private partnerships (PPPs), for which further nudge has been given in the Budget. For instance, the Budget states that the Sonnagar – Gomoh Section (263.7 km) of Eastern fright corridor will be taken up in PPP mode in 2021-22.
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