Sustained investments will improve order flows

Seetharaman R | Updated on January 12, 2018 Published on January 17, 2017


Revenue situation is expected to be better for the sector

Revenues of companies that cater to investment requirements of the Indian Railways have grown at a rapid clip. Revenues of Texmaco Rail and Engineering (Texmaco), Titagarh Wagons (Titagarh) and GPT Infraprojects (GPT) were up 87 per cent, 86 per cent and 27 per cent respectively for the six months ended September 2016 compared to that of the previous year. These companies manufacture freight cars, wagons, coaches, bridges, mechanical and other specialised equipments for the Railways. During the same period, the profit growth was even more impressive – with net profit up nearly 3 times for Texmaco and Titagarh while it was 50 per cent higher for GPT.

While the companies that depended on investments of the Railways showed a good performance, it was not the case for Indian Railways. As of November 2016, the projected growth of gross receipts for the financial year 2016-17 was in the negative as compared to that of the year before. The gross receipts of the Railways are projected to be at ₹1,03,000 crore, which is 2.5 per cent lower than that of the last year and 13 per cent below the initial budget estimates.

Freight revenues, which contribute to a major share (65 per cent) of the total gross receipts, are expected to be 7 per cent lower than that of the previous year. This is despite a 19 per cent increase in the freight rate in August 2016. In passenger traffic, which comprises 28 per cent of the overall receipts, the Railways introduced surge pricing in select passenger trains — which was not considered a success.

What to expect

While revenue growth is expected to be negative, the Railways will continue to increase its investment in infrastructure. With the expected gross budgetary support of ₹48,000 crore for 2017-18, the total investment in the Railways is expected to surpass ₹1,20,000 crore budgeted for 2016-17. This, in turn, should benefit companies catering to investment requirements of the Railways.

With dedicated freight corridor becoming operational and appointment of a railway tariff regulator looking a near-term possibility, the revenue situation is expected to improve for the Railways. The share price movements over the year for the companies didn’t exhibit any significant trend. While the shares of Titagarh and GPT ended 13 per cent higher compared to a year earlier, the shares of Texmaco were down 15 per cent.

Published on January 17, 2017
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