Low procurement rate may impact Railway projects: Titagarh

The Cabinet on Thursday approved Rs 24,000 crore investments for Railways especially for track expansion and decongestion of rail routes.

Speaking to CNBC-TV18, Umesh Chowdhary, VC &MD of Titagarh Wagons said that the Railways might not be able to achieve its targets due to low procurement rates. However, he added that phenomenal jump has been seen in implementation of railway projects.Below is the verbatim transcript of Umesh Chowdhary's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Latha: Are you seeing more bids for wagons or for any other part of the railways?A: This Rs 24,000 crore of investment that has been cleared by the cabinet committee yesterday is for expansion of track or decongesting the track across various states.What is very interesting in this investment is that this has been planned not on political lines but on business lines because if you see this is for building 2,000 kilometres of track across various states and for example there is a section called Nimpura and Adityapur section, which is now congested and operates at the capacity utilisation of 122 percent.So they are putting a third line there. That will completely ease up the entire clog from Howrah to Mumbai line. These will enable the railways to carry in a more competitive manner much higher amount of cargo.As far as the offtake for wagon is concerned, yes, we saw the tenders being finalised this year after a hiatus of almost three-four years. But that quantity was not good enough. I don’t think that the railways will be able to achieve the targets that they have set out to achieve with these kinds of procurements but we see that procurements will now start getting scaled up with these decongestions happening.Sonia: The last time when we chatted with you, you said that the ministry of railways is working in the right direction but the only problem is that the pace of implementation is very slow. Has there been any pickup in that?A: There has been a phenomenal pick up in the last four-five months because the railways have on one side started on the restructuring of the railways itself on functional lines rather than on departmental lines and that will give a big push to the implementation of these projects.On the other side, what they have done in the last what we have seen in the last few months is that the decision-making process has started once again functionally in the sense that earlier the simplification was there on paper but now people are more confident of taking decisions and that is a very positive change that we have been seeing in the railways over the last few months.Anuj: When will that translate into numbers? 2012, your revenue was Rs 700 crore and your profit was Rs 76 crore that has come down to last year's Rs 300 crore revenue and profit of Rs 6 crore. I am not saying you immediately go back to 2012 levels, that was a different era maybe but at what point do we see some improvement in numbers?A: As far as the wagon offtake is concerned, the current year they finalised an order of only 9,800 wagons or something thereabouts. If we look at our own production in 2011-2012, we did close to 4,000 wagons. So obviously the wagon business per se, the numbers are not looking that hunky dory because the capacity constraint of the railway was there in terms of these congested roads. But what we have been able to do is that for example, on a consolidated basis, we sit on an order book of about more than Rs 2,800 crore now. Majority of this revenue on our company and our books is coming out of the non-Indian railways segment. So out of a Rs 2,800 crore order book, my total order book from Indian railway for wagons, which used to be about 80-85 percent in 2010-2011-2012 kind of a period is now probably 10 percent.So as far as our company is concerned, we have been working on two way strategy, one is to de-risk ourselves from the Indian railway wagon procurement, on the other hand waiting for the Indian railway wagon to pick up. So when both of them happen, we can ride on both the growth stories.So as far as the company is concerned, we are concentrating a lot on metro, we have started bidding for metro projects in India, thanks to our Italian acquisition, now we are qualifying for metro projects in India. We have started making larger tenders for defence.Sonia: What is the quantum of the orders that you have bid for?A: We have bid for -- for competitive reasons I would not name the number here about the metro projects -- sizeable metro project and also with the merger of our shipping subsidiary corporated shipyard, now we have started qualifying for the various specialised naval and ocean technology vessels. So we have started bidding in those tenders as well.So basically we have bifurcated our whole business segment into these three-four segments and concentrating on all of them.Latha: What should we go with in terms of FY17 guidance? Is this 30 percent revenue growth something that you can produce for the full year and do you become a profit making company?A: So on FY16 on a consolidated basis, we were at about Rs 1,000 crore or a little short of Rs 1,000 crore. I believe that we should be able to definitely grow substantially from there in FY17 and yes, I had said this last quarter also when we gave our results that the period of power having taken those contracts, which were not giving us contribution is over and we should be doing well and we definitely expect to be much more profitable than what we were.