RITES Ltd., the export arm of Indian Railways, will look to focus on the bottom line as it continues to target double-digit EBITDA growth through a mix of export orders and consultancy projects. The company plans to maintain margins between 25 and 26 per cent.

Turnkey projects, which are relatively low on margins, will be restricted to “strategic ones” and remain at around 25 to 26 per cent of the company’s revenue.

Consultancy projects and export orders account for over 50 per cent of the company’s top line. While the value of each consultancy order isn’t “very high” and turnkey orders are considered high-value ones in comparison, margins in the latter are lower.

It had an order book size of ₹5,000 crore, across 700-odd projects, as on September 30.

Of this, ₹2,400 crore is for consultancy projects, ₹2,000 crore is for turnkey ones; and ₹300 crore is through exports. The balance includes leasing and other areas.

Push for exports

According to Rahul Mithal, Chairman and Managing Director, RITES Ltd. will aggressively push for rolling stock orders in export markets as many of them have started opening up again post-Covid.

While a strong export order book—from Mozambique and Sri Lanka—had helped the company maintain EBITDA margins in the 25–26 per cent range, margins in Q2 dropped to 27.5 per cent (from 29.6 per cent in Q1) as some of the export orders were nearing completion.

“However, now that the world is opening up again post-Covid, the push will be on exports of rolling stock and consultancy businesses, where margins are good. Our target would be a double-digit growth in EBITDA,” he told businessline.

“Our focus will be on bottom-line growth and not just top-line. So we would look to ensure there is a minimum hit on margins.” Mithal added.

Turnkey Projects

Turnkey projects will continue to remain a de-risking option and be spaced out.

RITES would also push turnkey projects through special-purpose vehicles or joint venture tie-ups.

“We aren’t a construction company and don’t plan to be one. So going forward, turnkey projects will be around 25–26 per cent of our topline and be restricted around those levels. Bidding will be mostly for strategic reasons or where we have a strategic advantage,” he said.