For investors interested in the infrastructure theme and Railway stocks, Rail Vikas Nigam Ltd (RVNL) can be a good option. This is especially so since Budget 2023 has allocated Railways ₹2.4 lakh crore out of its ₹10 lakh crore capex.

RVNL is trading at a one-year forward PE of 12.2x and one-year forward EV/EBITDA is 8.5x. The stock seems to be decently priced when compared to its peers. Investors may accumulate the stock on dips given its reasonable valuation, entrenched position in Railways sector and strong financials.

Business prospects

RVNL is a government company where 78.2 per cent of the stake is owned by the Centre through Ministry of Railways. It is involved in laying new lines, gauge conversion, doubling, electrification of railway lines and building workshops. It has commissioned more than 15,000 route kilometres of railway infrastructure till date.

The company has traditionally been receiving orders on nomination basis from Indian Railways; presently 80 per cent of its orderbook comprises such projects. The remaining 20 per cent are projects bagged through bidding. The company is trying to diversify into metro, tunnelling work, port connectivity, marine works, and highways.

One of the landmark projects being undertaken by RVNL is the reconstruction of Pamban bridge in Rameshwaram, Tamil Nadu. The project, started by RVNL in February 2020, will be India’s first vertical lift bridge. The cost of project is ₹540 crore and it is expected to be ready by end of March 2023. As per Indian Railways, 84 per cent of the work has been completed as on January 3, 2023.

The company has an order book of ₹55,000 crore as on December 31, 2022. The book to bill ratio is 2.83 (based on FY22 revenue) which means that the company has a revenue visibility of three years. RVNL’s orderbook is mostly made up of Indian Railways projects and therefore the company’s outlook is closely linked with Railway’s capex. In the last five years the railway capex has grown strongly at CAGR of 13.8 per cent. During this period, the annual revenue of RVNL has been approximately in the range of 7-10 per cent of the annual Railway capex.The capex (including investment in Public enterprises) figure for 2023-24 is estimated at ₹2.9 lakh crore which is 19 per cent higher than FY23 figure, and therefore the top line prospects look good for RVNL.

RVNL bagged Power Supply Receiving & Distribution System in Surat and Ahmedabad metro projects in January 2023 worth ₹673 crore. In addition, it will also be developing Kharicut Canal Package 2 & 3 worth ₹236.2 crore and ₹248 crore for Ahmedabad municipal corporation. The company has also gone international with development of UTF Harbour Project in Maldives, which it won in bidding from Indian Ministry of External Affairs in November 2022.

Diversification of the business is a good move as it will not be dependent on a single client (Indian Railways) and therefore the company can explore other opportunities and avoid concentration risk.


For the nine months ended December 31, 2022, RVNL has reported a 12.5 per cent growth in revenue from operations to ₹14,561.74 crore. EBITDA grew 14 per cent to ₹1,613 crore. Net profit for nine months ending December 9, 2022, was ₹1,061.3 crore which is 32 per cent higher YoY. The company also receives income from its JVs and in nine months ended December 31, 2022, this income was ₹140.78 crore, which is around 59 per cent higher than the same period the previous year.

The company, in addition to its operations, also has joint venture firms from which it receives regular dividends. The JVs of RVNL- Kutch Railway has PAT of ₹237.42 crore and RVNL has 50 per cent share which amounts to ₹118.71 crore. Bharuch Dahej railway company has PAT of ₹40.6 crore, and RVNL has 35.46 per cent, which comes to ₹14.4 crore. The remaining are from other JVs. The company had set a revenue target of ₹20,000 crore for FY23 but the management is of the opinion that it can exceed this target by around ₹500 crore which is around 6 per cent YoY growth. The guidance for FY23 net profit (standalone) is ₹1,200 crore, an increase of 10 per cent Y-o-Y.

It needs to be noted that given business model is based on projects, quarterly revenue can be lumpy.

Investment thesis

The company has a strong set of financials. Between Fy19-22 Revenue grew at a CAGR of 24.4 per cent , EBITDA grew at CAGR of 31.21 per cent for FY19-22 and the net profit grew at CAGR of 18.8 per cent. EBITDA margins remained stable at 5.27 per cent in FY19 to 6.2 per cent in FY22. The company has a comfortably placed balance sheet, and the net debt is at ₹3,651.47 crore. Debt/Equity ratio of RVNL (FY22 figures) is 0.98. Net Debt to EBITDA is 2.85 times, which is comfortable.

 The trailing dividend yield of the company is also around 3 per cent which seems decent enough. The one year forward EV/EBITDA is 8.5x which is at par with its other peers. The stock seems reasonably valued and looking at its long-term prospects and huge orderbook investors can accumulate the stock on dips.