Railways orders to improve going forward: Titagarh Wagons

Traditionally, the first quarter is a slack one, but the June quarter was particularly weak for Titagarh Wagons as it refused to matched the 'abysmally low' rate quoted by a competitor, Umesh Chowdhary, Vice Chairman and MD of the company tells CNBC-TV18."Now the railways have realised (their mistake) and they have gone ahead and started offering differential prices," he says."So, while that tender plus the new tender is likely to come out so we believe that the situation from the wagon side on the Indian Railway purchases is likely to improve going forward in the next few months," he says.Below is the transcript of Umesh Chowdhary's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Take us through your wagon and coaches segment. In that you have seen a drop in your EBIT performance, your operational performance has deteriorated. Is there some trouble there and what will be the expectations as we head into next couple of quarters?A: Two things I would like to mention about the quarter - (1) Q1, traditionally if you see, has been a slower quarter for our industry because the orders from the railway starts coming in by May-Jun-July and then the execution starts. However, the current quarter has been an exceptional quarter wherein there have been zero sales to the railways for any Indian railway wagons primarily because the railways had asked us and expected us to accept the lower rate which was offered by one of the competitor in the previous tenders and we declined to do so. However, very recently the railways have come back and said okay we don’t want you to accept the lower rate and you continue to supply the wagon at the earlier contracted rate and the sales of that will start picking up. The second is as far as our coach business is concerned we had two contracts. The first contract we completed in the execution in March 2015 so the sales were booked in the previous quarter. We were starting the execution of the next contract. Typically when you start the execution of a contract there is a prototype approval and inspection and testing and all that stuff happen and that was going on so we had zero sales again for the coach business. The contract for 12 rakes of MEMU coaches that we have the execution of that is going to start from this quarter onwards. So, therefore this quarter we neither had wagon sales – zero Indian railway wagon sales and zero Indian coach sales. All the revenue that we have got is from either our subsidiary businesses or the private sector wagon businesses.Latha: Do the orders get pushed to current quarters should we expect bunched up performance?A: That is right, the performance will get normalised from this so it is not something that will cumulate because as I said that the railway’s order has to be finalised. The last tender has we had spoken, somebody had quoted abysmally low price which was unworkable. We and as other members of the industry also and including government owned companies refused to accept prices at that level. Now the railways have realised and they have gone ahead and started offering differential prices. So, while that tender plus the new tender is likely to come out so we believe that the situation from the wagon side on the Indian Railway purchases is likely to improve going forward in the next few months.