French order has put us on top in Europe: Titagarh

Titagarh Wagons bagged an order worth 39 million euro from the French National Railway Corporation (SCNF) and this has made the company one of the biggest participants in Europe, Umesh Choudhary, vice-chairman, Titagarh Wagons told CNBC-TV18.

Choudhary adds that an attempt to increase cost-optimisation will be made in meeting the order and he is optimistic of the government's announcement of plans to procure 16,000 wagons. Below is an edited transcript of the interview on CNBC-TV18 Q: What is the impact of your French subsidiary recently bagging an order?
A: The order, worth 39 million euro, was signed last week in France and will be executed over the next few years. This our order book, currently in France, to almost 100 million euro.  This order makes us one of the largest players in wagons within the European market. So, from that perspective it is a very significant development that has taken place for Titagarh Wagons- Arbel Fauvet Rail (AFR). Q: What are the margin-levels that this order offers to the French subsidiary and do you expect to bag any new orders?
A: Of the few orders under negotiation, this was the big one and we worked on it for the last year-and-a-half. The average EBITDA margins in the French subsidiary are 10-12 percent and this order also offers similar EBITDA margins. We are attempting to induce a lot of cost optimisation with this order as we already have the volumes. Some of the cost-optimisation initiatives include outsourcing from India and a lot of improvements in the process in the subsidiary to ensure increased efficiencies. Q: Is this a government order?
A: The order is from a subsidiary of the Société Nationale des Chemins de fer français (SNCF) and from that perspective it is a government order. Q: With you use your strong presence in Europe to get orders for your domestic unit?
A: It does not happen so quickly. We have announced to reach out to newer markets like the African region, particularly the Francophone parts. Q: In a recent restructuring move, you plan to transfer the heavy earth moving division into another unit, the heavy earth moving machineries (HEMM). What is the scheme of arrangement, the swap ratio and the consideration?
A: There will not be any swap ratio because this is going to be transferred to a 100-percent subsidiary. So, essentially the business model of heavy earth-moving and mining equipment- the entire management and the marketing structure, will be very different from the products that we manufacture. The scheme of arrangement has been finalised but the timing is dependent upon the entire regulatory timeframe. I presume it should take another about three-to-four months. Q: What is your estimate of the possible growth in revenue and margins of your domestic unit for FY14?
A: I will not make any forward-looking statement, but there are delays in wagon orders. We hope that the tenders would be announced soon. The government has announced that it wishes to procure 16,000 wagons this year as well. So, we are keeping our fingers crossed.