Titagarh Rail Systems (TRS), formerly known as Titagarh Wagons, has been among the biggest beneficiaries of Indian Railways’ Make in India scheme in recent times, says its MD and CEO Umesh Chowdhary.
After increasing its Indian order book from around Rs 2,500 crore to Rs 27,000 crore in just over a year, the company is looking to consolidate its manufacturing facilities to ensure timely execution, Chowdhary told Moneycontrol in an interview.
Titagarh Rail Systems plans to invest around Rs 650 crore over the next two years, which will not only ensure the timely execution of orders, but also help the company compete for new tenders, Chowdhary said.
He added that given the scale at which domestic manufacturing is growing, Indian companies are not only competing among themselves, but they can also go up against international firms from China and Europe for global tenders as well.
Also Read: Titagarh Wagons 30% market share in Indian wagon industry
In the last year, the Kolkata-based rolling stock major has won an order worth around Rs 7,800 crore for the supply of 24,177 wagons, bagged another one to supply 80 Vande Bharat trains worth around Rs 9,600 crore, signed a contract worth Rs 12,226.5 crore to manufacture 15,40,000 wheels for the railways, and has closed a deal for Rs 866 crore to supply 24 trains for phase I of Surat Metro.
Edited excerpts from the interview:
Q. Last year was a great one for Titagarh Rail. the company won three massive contracts from the Indian Railways (IR). Can you update us on the execution of these projects, and how much are you planning to invest in 2023-24 in these?
A. Having spent about Rs 300-350 crore in the last couple of years, we expect to incur a capex of another Rs 600 to 650 crore.
In terms of project execution, of the 24,000 wagon order, we have supplied the first tranche of about 4,000 wagons. The second tranche will be supplied by August.
We have started work on the prototype for the Vande Bharat train and aim to roll out the first one by June 2025.
We have three years to set up the manufacturing plant to produce wheels, so that should be ready by 2026, following which we will start production.
Q. Titagarh Rail Systems reported its highest-ever revenues in 2022-23. Do you expect this growth momentum to continue in 2023-24? What is your guidance for your topline and bottom line?
A. As a policy, we do not give any forward-looking projections or guidance. But if you look at the growth that we've had over the last 8, 10, 12 quarters, it has been consistent and we hope to be able to maintain the trend.
Q. What is the size of your current order book?
A. Our Indian order book stands at around Rs 27,000 crore as of March 2023, which we will execute in the next 3-5 years.
Q. Do you expect your order book to remain steady over the next year, or do you expect it to grow even more?
A. We are in a tender-oriented business in a country that is growing phenomenally. I think we are the biggest beneficiaries of the phenomenal growth in infrastructure that is being witnessed in this country, thanks to the policies of the government.
We will definitely not get off the bus. We will continue to ride this growth and see where it takes us. We will continue to participate in tenders. And if the tenders continue to come like in the past year, then definitely we will be able to get additional orders.
Q. The IR is expected to come out with another large tender to procure freight wagons. By when do you expect this tender to be announced, and what portion of these tenders are you targeting?
A. We have as much information as you. We believe the tender should be announced in the next maybe four or six weeks.
We'll be looking at that opportunity very closely and very seriously. We will definitely participate in that.
Q. It is expected that this new tender will include aluminium wagons as well. Will you be specifically looking at this segment? Do you see the market for aluminium wagons growing in India?
A. We would target any type of wagon that Indian Railways wants to procure. We have a unique advantage in that we have already manufactured aluminium coaches for Pune Metro. We don't see that as a big challenge.
I believe there will be a market for different types of wagons in India. Though I don't see aluminium becoming the preferred choice in wagons, there is definitely a market for some quantum of aluminium wagons.
Q. What is your current wagon-building capacity and what are your expansion plans for the next three to five years?
A. We currently manufacture around 700 wagons a month, and our plan is to increase that to 1,000 by the end of this financial year. We believe that should be sufficient given IR’s plans now. I don't have a planned capacity expansion beyond that at this point in time.
However, if the government's plans for wagon acquisition increase substantially, then we will look at capacity expansion.
Q. Is your company looking to bid for the tender to manufacture 120 Vande Bharat trains, if talks between RVNL, Transmashholding, and IR fall through?
A. I would not want to comment on speculations. Having said that, we are in the market to manufacture trains. And if there are additional tenders, we will definitely participate because we would like to grow our business. We've created capacities and we would also like to exploit and expand those.
Q. Do you think that the IR’s decision to boycott Chinese companies is a big reason for the success of Indian firms, or can Indian manufacturing go toe-to-toe with their Chinese counterparts?
A. It’s not a boycott, it’s about Make in India, which, along with Atmanirbhar Bharat, has truly energised Indian industry. Companies like ours would not be able to do the things we do without such policies.
Also, in order to compete with global players, Indian manufacturing needs scale. In the last two years, the scale has increased substantially, making it globally competitive — when there is a level playing field. But at times one has seen that there is an uneven playing field when it comes to competing for tenders, i. e., there are export subsidies, dumping, etc.
Then obviously, things become very difficult. The government is very conscious and agile when that happens, supporting and protecting the interests of Indian industry.
Q. You mentioned last year that you will expand your business in Africa and Australia. What is the status of that?
A. We won our first order from Australia just a few weeks ago. It's a small order, but it's an entry into the market for wagons.
We have been working on the African market. But to be honest, the opportunities that have come up in India are so overwhelming that our resources and our focus have been primarily on the Indian market in the past year.
Q. Wagon manufacturing has been your core strength, but you’ve recently diversified into other businesses. What is the thinking behind this? What percentage of your revenues do you expect to derive from these businesses in the next five years?
A. The diversification rationale has always been there. This is reflected in the decision to change our name from Titagarh Wagon to Titagarh Rail Systems, as we are both in the freight rolling stock or freight rail system, as well as the passenger rail system.
In terms of the future outlook, we believe that the passenger rail system presents a very large opportunity. We are in the process of building the capacity to produce almost 700 to 800 passenger coaches per year, which can generate revenues that is larger than what we earn from the freight rolling stock.
Q. Titagarh was the only company that had shown interest in leasing trains for phase II of Chennai Metro. You had submitted a bid to lease out 126 coaches. How’s that coming along?
A. Nothing has really moved. It was an expression of interest (EoI), not a tender. Once again, it is an extension of what we do, and what we do is manufacture and sell coaches. Whether the coaches are bought on a downright payment or leased does not really matter. But we have to see whether it is feasible or not.
I think such radical moves are not closed overnight. They take time.
Q. What are the company’s plans for its shipbuilding business, and what portion of your revenues are you targeting from these operations in the next two-three years?
A. Capital allocation to the shipbuilding business will be stopped for the next couple of years till we have completed our passenger and freight rail system projects.
We've got the land, we have got the facility. The development of that facility will happen once we have completed the projects we have on hand.
Q. The Indian Railways has halted new applications for private sector wagons. How has that affected your business? And what interest have you seen from private players in procuring wagons?
A. It doesn't make any difference to our business. If you look at this segment historically, the number of wagons or rakes that were added to the system was anything between 30 to 60 per year. The current pipeline of rakes awaiting approval is around 300-500. In my estimate, that is the reason why the IR won’t accept any fresh applications from the private sector for inducting new wagons.
We have seen very strong interest from private players to procure wagons. We have been supplying a lot of private wagons to companies, especially in the mining, logistics, and steel sectors.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
