Titagarh Wagons has planned to merge its heavy earth-moving and mining equipment division with a 100 percent subsidiary, Titagarh Cranes. Umesh Choudhary, MD of Titagarh Wagons told CNBC-TV18, it would help the company grow this segment on its own accord.
Going into the Budget, Chowdhary feels although, there is a lot of discussion about slashing budgetary expenditure, policy announcements to boost private sector investment in wagons will be more than adequate for their business.
Here is the edited transcript of the interview on CNBC-TV18.
Q: You are planning to demerge your heavy earth-moving division and probably merge it with Titagarh Cranes. Tell us if there is any profit and loss (P&L) impact and what are the sizes of these companies. What is the reason behind this revamp?
A: The heavy earth-moving and mining equipment division, as a percentage of the total revenue of the company was extremely small. Till now, it was less than 5 percent or round about 5 percent and because of the overall potential in this sector and the different business model that this sector has to follow, it is completely different from the wagons and the coaches division. We have decided to merge it into a 100 percent subsidiary so that we can grow this business on its own accord.
We have started recruitment of senior management personnel which we will be announcing very soon in this division and apart from the regulator excavators and the crawler cranes that was being manufactured by this division, we would be introducing the other products such as pick and carry also over a period of time. That requires a completely different business set up and a different business model.
We believe, rather than doing it in the parent company, which will become a little confusing and it will not be able to give the right thrust to this division's growth or this sector's growth, we would rather have it by way of our 100 percent owned subsidiary which can operate in its own style.
Q: I understand that you have other demerger plans as well. There was some news that you are planning to demerge your rail coaches division into Titagarh Trains Private Limited. What’s the status on that?
A: That's exactly what we have done in the board meeting yesterday. We have deferred that plan or we have scrapped that plan right now and that is primarily on account of the uncertainty in the wagon business over the last few months or last few quarters that we have seen. The Vision 2020 document and the Planning Commission documents envisaged procurement between 22,000-29,000 wagons in a year. But, the actual procurement in the last few years has not really been commensurate to that plan or vision.
We have seen in the last three quarters that the wagon industry has gone through a rough patch primarily on account of A) the delay in order B) delay in freezing of designs C) free supply, inputs coming on time etc. We believe that keeping the coach within the wagon business or in the parent company would make sense. Over a period of time the company’s operations do not get impacted and even if this slump in the wagons segment continues, we would be able to more than make it up by the other segments such as coaches.
For example, the order book now including coaches and wagons for the company stands at about Rs 750 crore which gives us visibility and this is before the start of the next financial year or the next financial year tenders have come in. So, this would give us a good visibility for the next fiscal.
Q: What were the orders you got from the Indian Railways this year and what is your expectation in FY14 because there is an all-round talk of slashing of expenses?
A: That’s right. Unfortunately, that's exactly what I was saying. The FY12-13 tender is not yet out. It is going to be floated hopefully in the next couple of weeks or something of that sort. We are very anxiously waiting to see what's going to happen in the Budget because there is an all-round talk of a lot of slashing of budgetary expenditure.
But, even if that has to happen, I am also hoping that will be compensated by certain policy announcements to encourage private sector investment in wagons. That would more than adequately make up even if there is a curtailment in the budgetary expenditure.