Will benefit indirectly from IR locomotives order: Titagarh

The Indian Railways (IR) has signed two contracts with Alstom and GE Transportation for a combined value of around Rs 45000 crore (USD 6.8 billion). The contracts were signed on November 30 for a total of 1800 freight locomotives.

While Titagarh Wagons has not won any order, VC and MD of the company Umesh Chowdhary says for each locomotive that IR buys, it has to buy hundreds of wagons. To that extent, a large amount of wagons will be required. "So the fallout of this order will be phenomenal, and hence it is a very positive news for the company," he told CNBC-TV18.

However, the government is yet to float any tender for wagons after floating one in March. Chowdhary expects the second tender of the year to be floated anytime now. Going ahead, he expects to see an increase in orderflows.

Below is the verbatim transcript of Umesh Chowdhary’s interview with Reema Tendulkar & Sonia Shenoy on CNBC-TV18.Sonia: There is this big order that has taken place in the railway space and now there is lot of excitement around the sector. Will Titagarh Wagons benefit in any way from this order?A: This orders that have been placed, this has been actually going for last several years almost a decade and this is for supply of locomotives. So, for each locomotive that the railway buys they required to buy may be 100’s of wagons per locomotive because ultimately what are they going to do with these locomotives. So, obviously it is going to mean large amount of requirement for wagons. So, while we do not directly benefit from these orders as they have gone to General Electric (GE) or Alstom but the fallout affect of this order, the railway’s built up of capacity by way of purchase of these locomotives is going to be phenomenal and this built up can only get completed when they buy the matching umber of wagons .So, yes it is a very positive move for us. Sonia: You did mention that there won’t be any immediate benefit to a company like yours. Of course there will be large amounts of wagons that will be required for this order. Just tell us purely for Titagarh Wagons have you seen any improvement in the orders from the governments table and if yes what kind of visibility do you have for the next six months or so?A: Unfortunately the tender for wagons is still not been published. However, we hear that it should be out any day. So, now it is a matter of days that we are waiting for the second tender of this current year. When I had spoken to your channel may be around March this year the railways had come out with the small tender and the prices had completely gone haywire. I had mentioned that time - that my belief is that this is the year that the railways will come up with the second tender because their requirement cannot get met with just about 5,000-6,000 wagons. Now that is likely to be a reality because it was a part of the Budget announcement as well. So, we are hoping that the next tender for this current year should be out any day. With the whole process of the railway working having been simplified over the last few months I am expecting that if the tender comes out then the finalisation which used to take anything between, I would say six months to six years as we have seen in the case of the locomotives is now down to almost less than six weeks. So, we are expecting the order flow to improve going on and when we see that such large mega contracts are being signed that means decision making is again started. That is a very big positive for us. The biggest suffering that we have had in the last five-seven years in the railways is the lack of decision making and USD 7 billion contract getting signed just shows that there is a complete reversal of mind sets from in decision to quick decision making.  Reema: Coming back to this USD 7 billion deal which was signed by the Indian Railway, you said it is basically for locomotives. However, for every locomotive you would need a few wagons. So this deal we understand is for 1,800 freight locomotive. So, how many wagons would roughly be required to address 1,800 freight locomotives and what would be the size of the required wagons then?A: These locomotives primarily are going to be used in the dedicated freight corridor. If you look at the dedicated freight corridor it is a different track axle load compared to what is being used in the current network. So, realistically speaking the entire fleet of wagons which is there will be completely required. It is a calculation which will need to done. However, this will run into several 100 - 1,000s of wagons because it will be a completely new network altogether. These are a high horsepower locomotives. So, if you look at the current locomotives that are there they are 50 percent of the horsepower. So, this 1,800 actually on an apple to apple basis translates into double of that which is 3,600 locomotives. So, if we really look at that it would mean a complete doubling or a huge quantum jump of the railway fleet that the railway existing fleet is.