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Escorts Railways Equipment Division, a unit of the Escorts Group, has earmarked nearly ₹400 crore for possible acquisitions in India or Europe to help its entry into the lucrative metro rail sector.
Potential targets could be companies in areas such as air-conditioning, traction equipment and coupling systems —– all important components for metro rail.
“We will also develop products locally through a combination of strong in-house R&D and collaboration with foreign companies. However, high import substitution is vital,” Dipankar Ghosh, CEO, told Business Line .
Product demand
Ghosh the Escorts’ railway revenue to quadruple in the next three-four years from the present ₹350 crore. It sees good demand for its new products such as bogie-mounted brake systems for freight wagons and axle-mounted disc brakes for LHB (stainless steel) coaches. ICF has completed the switch-over to LHB.
The railway division contributes nearly 8 per cent of Escorts’ revenue, Ghosh said.
The Indian Railways is ‘technology starved’. Components that have been available in the European markets for over ten years have a complex mix of electronics, software and mechanical. The Indian Railways may not have invested in these imported components that are five-ten times costlier, he said.
Entry restrictions
On the delay in foraying into the metro rail sector, Ghosh said one of the reasons is that suppliers to metros should have experience to be eligible to bid. This is a major entry barrier for the company, which could take the acquisition route to tap into the metro rail market.
“Despite having strong engineering capabilities, we are not considered as we don’t have the experience. In other words, they only need global players. Lot of industry lobbying is going on but the entry barrier is very high. Looks like it [giving orders] is only linked with multinational companies who quote a high price,” he said.
ICF is the biggest client for Escorts, which supplies components such as brake systems, couplers, axle-mounted disc brakes and suspension.
Nearly 2,000 metro coaches are operational. In both supply of railway coaches and components, multinational companies have a substantial market share. There is an immediate requirement of 1,420 cars and over the next three years, over 2,000 metro cars will be required, according to the government data.
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