Moneycontrol
May 27, 2016 12:17 PM IST | Source: CNBC-TV18

Aim to grow defence biz; see higher wagon orders:Titagarh Wagons

Umesh Chowdhary, Vice Chairman and Managing Director, Titagarh Wagons is confident of wagon orders improving on the back of government’s investment focus on railways.


Umesh Chowdhary, Vice Chairman and Managing Director of Titagarh Wagons is confident of wagon orders improving going forward on the back of government’s investment focus on railways.


Currently, they have received a larger order for around 2200 wagons from Indian Railways, he said.


For the quarter gone by, 25 percent of the total sales came from the defence segment. The current orderbook from the defence business stands at Rs 100 crore.


For the fourth quarter of FY16, Titagarh wagons reported a consolidated net loss at Rs 20.2 crore versus a profit of Rs 7.6 crore for the same quarter earlier fiscal.


The consolidated total income was up 33.1 percent at Rs 316.5 crore versus Rs 237.8 crore in Q4FY15. The year-on-year (YoY) EBITDA was up 29.1 percent at Rs 22.7 crore versus Rs 17,6 crore. The exceptional loss for the quarter was Rs 19.54 crore versus nil in the same quarter earlier fiscal.

He said the Italian acquisition accounted for Rs 125 crore of the revenues in the current quarter. Last year July, the company had acquired Italian passenger and metro coah maker Firema Trasporti SpA, whcih gave them access to new technology and a robus manufacturing base.

Below is the verbatim transcript of Umesh Chowdhary's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Tell us about this joint venture (JV) with the French company. You did mention in your press release that it will add to the company's existing business of the manufacture and sale of Bailey Bridges, how much does that currently contribute to your revenues and margins and what will this JV bring on the table for you?

A: Bailey Bridges is something which is part of the defence vertical that we do. So it is not a very large business. Right now, our total defence business order book was about Rs 100 crore and Bailey Bridges was 25 percent of that. However, Bailey Bridges and these other modular bridges would expand our defence portfolio to a great extent.

This company is supplying these modular bridges to almost 50-60 countries right now and this JV essentially would be designed cum marketing JV as the manufacturing would be done at our existing location. So, it would give us more workload in our factory. We get their designs and their IP and the brand name and increase our product portfolio not only for the Indian but the other Asian markets as well.

So they would be doing a revenue of about 150-200 million. It is a good potential business.

Sonia: Over the next couple of years, what percentage will defence form as a part of your total sales?

A: I am leaving the large project that we have participated in because if any of those kind of fructify then the defence business will suddenly shoot up but outside those as a regular business that we are doing, the shelters, the launchers then the canisters and the bridges, here we are expecting -- as far as the Indian business is concerned -- about close to 25 percent of our business to come from the defence segment?

Latha: What is the like-to-like comparison? Your Q4 numbers included the Italian acquisition and therefore 33 percent revenues and 29 percent EBITDA. Without that what would it have been?

A: About Rs 100-125 crore of the topline comes from the Italian acquisition in the last quarter.

Latha: In that case, you would have done a little less than the previous year's Rs 238 crore?

A: Absolutely, the wagon orders that we were expecting in India were only released about 25 days ago. If you look at the last three-four years, the wagon orders have been completely at its lowest. So the year before, in FY15 we did about 700 wagons in India for the Indian railways. Last year also it was close to 1,000. This year now we have received the largest order as a growth of close to 2,200 wagons and the prices have also become much better than what they were. They were abysmally low in the last couple of years as we have discussed on your channel in the past.

Latha: The popular understanding is that railways are getting all the investment from the government. Is that getting reflected? If you are saying it is 2,200 waogns, it definitely seems to be impacting even if it is delayed. Is that how you would understand it?

A: Yes, absolutely. So I have mentioned this in the past. We are at the last end of the spectrum. The rolling stock investment happens at the last. So the investments that have been happening in the railways are primarily on the track capacity on the signalling on the capacity addition, so once that capacity addition happens then only the rolling stock ordering happens.

So I would say that 2,200 wagon order that has been placed is not going to take care of the requirement of the railways. Because with the dedicated freight corridor coming in, 10,000-15,000 wagon procurement, I don’t think will allow railways to reach its target loading and also justify the kind of investments that are going into build up capacity. So, this is the kind of greenshoot I am seeing in the whole thing. It has started but I am only seeing that this will balloon from here, the requirement should grow up much substantially significantly from here.

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