Stalled rail projects reviving; focus to be on EPC: Texmaco

Railway projects in West Bengal stalled for the last 4 to 5 years are now being revived, says Texmaco Rail’s Executive Director (ED), AK Vijay. Recent talks between the Railway Ministry and the West Bengal government have resulted in projects--including metro projects--getting active.Talking to CNBC-TV18, Vijay says that the main focus is on developing railway infrastructure. Engineering, procurement, construction (EPC) projects will be the most profitable in future, he adds. Vijay says on-ground work is visible in new tenders for projects. A tender for a locomotive project in Bihar, which was stalled for nearly six years, was recently re-floated, he adds. Texmaco’s new acquisitions, the most recent one Bright Power, are expected to bring in more business and eventual increase in revenues, Vijay says. The company’s current order book stands at Rs 2,600 crore of which Rs 1,300 crore worth orders are of its subsidiary, Kalindee Rail.Below is the transcript of AK Vijay’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: Before I start talking about Texmaco Rail itself, I just wanted to understand how the situation in Bengal is with respect to the rail ministry because there was some talk between Suresh Prabhu and Mamata Banerjee with respect to improving rail connectivity in Bengal, improving linkages with ports, terminals, etc. Has the situation picked up pace and what kind of orders are you seeing from that part of the country?A: Bengal, as everybody thinks is a laggard, but truly speaking, things have changed in Bengal and are changing. After the meeting of Suresh Prabhu and all, a lot of railway projects, which were announced in the tenure of Mrs Mamata Banerjee when she was the minister of railways - in fact in last four or five years no significant movement was there. But that movement, we are now seeing on the screen and the local government is also helping out in clearing the encroachments, etc. so that the rail projects which were held up for want of that the availability of land is now taken care of. Gradually, things are improving. So, that is a good sign. A lot of metro projects are also now there. Kolkata is the only city where the metro projects are being monitored by the railways. So, that also is an advantage which the Railway Minister’s visit has paved way for. And we foresee that, in Kolkata, things will improve and the government is trying to do a lot on that.Latha: But, this is very positive talk from the government and the ministry. Have things improved on the ground. The Indian Budget itself indicated this time that they are going to spend a lot of money on roads and railways. The railway budgetary expenditure was Rs 70,000 crore. Any improvement in orders?A: Your questions have got two angles. As far as the improvement on the ground level is concerned, certain encroachments have been removed by the government and the construction work in certain areas have started. So, this is a positive movement which is taking place.As far as the ordering is concerned, it does not pertain to Bengal because rail industry is pan-India and it cannot depend on what is the requirement in Bengal.Latha: My question is not at all with respect to Bengal. My question is with respect to Texmaco and the rail industry. Has the sector thrown up more orders? A: We have to divide between a few sectors in the railways. One is the rail infrastructure where the clear focus of the Minister is visible. And Minister in his budget speech also and subsequently also maintaining that he has to create the rail infrastructure first before actually getting into the improving the railway connectivity with others and improving the ability of the rakes, coaches, wagons on the rail system. So, that is where the focus of the Rail Minister is. That is why Texmaco has identified that railway engineering, procurement and construction (EPC) project is a key area where the development is foreseeable in the near future. In line of that, the company has in past acquired Kalindee Rail Nirman and very recently we have acquired just a couple of days ago, a company called Bright Power which we have signed the agreement with them and hopefully the deal will be over in the next couple of months. So, these two which are basically only in the railway infrastructure projects, these two companies will certainly, bring big prospect and in fact rather large business in the Texmaco kitty and Texmaco fold. As far as the Texmaco’s main products are concerned, let me tell you that Texmaco today, is a multi-product railway solution company and Texmaco is producing today wagons, coaches, even the loco components and we are producing railway castings for the railway industry and with our joint ventures with Wabtec which has recently been signed and which is now on the floor. We are going in a big way on the railway safety products as well. So, these altogether combined will certainly yield substantial result for Texmaco’s future. And businesswise I foresee that government is now keep that there must be something. Although nothing has come out as yet, but in infrastructure segment tenders are coming out. In fact, the largest two tenders which we have seen ever released by the railways about the installation of locomotive factories in Madhepura and Marora which was pending for last six years, that tender has now been opened. So, fortunately the developments are taking place in the infrastructure segment and also in the growth on rail segment and we are pretty hopeful.Sonia: Which is the tender you said? A: It is two locomotive projects which were stalled for the last six years, it was announced at the time when Lalu Prasad Yadav was the Railway Minister and both the plants are likely to come up in Bihar, that is Madhepura and Marora. These two plants are very large value projects which have been announced by the railways.Sonia: So, we know for a fact that government orders are not coming in, so tell us about the private sector, what is the update on orders from the private sector and what is the order book for Texmaco currently?A: Private sector-wise which was actually, if you last see three, four years, this segment was drying up. People were not very confident of having good business prospects and that is the reason why they were thinking about that not to invest money into the owning the infrastructure for the railways for their own business and all. The scenario has gradually now changed. What I foreseeing today – in industrial segment - demand is coming in a big way, container train operators who have been in doldrums because of the changes in railway policy in the past, they are now seeing that yes, there is a huge demand potential coming up and they are increasing their fleets. Although, it is not coming in gross, but then yes, they are coming and fortunately for us - we are the leading player in the segment. It is yielding good business prospects for us. If you want to know the order position of Texmaco, I think today, position is about Rs 1,300 crore order book is there for Texmaco alone and similar order book is there for our acquired company Kalindee Rail. So, together these two companies have Rs 2,600 crore order book.