Bengal-based firm buys 100-year-old German company to expand global reach

RAIL.ONE has been selling railway sleepers across the globe and has 850 employees

It was back in 1894, that Gustav Adolf Pfleiderer established a lumber rafting and trading business in Heilbronn, Germany. By 1920, the family-owned company Pfleiderer was already supplying wooden sleepers to Deutsche Bahn (then known as Deutsche Reichsbahn), the German railway operator. Several innovations followed in the subsequent years, the company emerged as one of the important partners of Deutsche Bahn in supplying high speed tracks. Meanwhile, the Mittelstand company (term used for typically a family-owned small and medium-sized manufacturing firm in Germany) had expanded footprints across the globe.

In 2006, the track system unit of Pfleiderer, with around 850 employees, was sold to AXA Private Equity and renamed RAIL.ONE.

In 2013, in one of the first of its kind acquisitions, a lesser-known Indian firm from Siliguri in West Bengal, PCM Group, acquired RAIL.ONE. As PCM group completes almost four years of acquisition, the odd marriage between a mid-sized Indian and a German company has turned out to be precedence for the much touted Make in India Mittelstand programme, aimed at collaboration between Indian and German small and mid-sized manufacturing units.

In fact, PCM Group acquired a company which was almost double its size in terms of turnover. RAIL.ONE has a turnover of around Euro 145 million (about Rs 1,091 crore), while PCM Group has an annual turnover of close to Rs 600 crore. Thus, the PMC RAIL.ONE Group has now a collective turnover of close to Rs 1,600 crore.

"We purchased at a price much lower than the revenue. The PE fund which owned RAIL.ONE did not want to run the company, and it was a good opportunity for us to expand our footprints," said says Nishant Mittal, member of the supervisory board at PCM RAIL.ONE.

In fact, back in 2007, when Saudi Arabia was inviting bids for setting railway network in the region, RAIL.ONE was a major competitor to PCM Group. While PCM set up two plants in the country, RAIL.ONE set up one.

"That time, in 2007, we never thought of acquiring RAIL.ONE as it was completely out of our reach," says Mittal.

By virtue of the acquisition, an Indian-promoted firm has now emerged as a major supplier (Q1 or highest quality standard supplier of concrete and turnout sleepers) to Deutsche Bahn. So far, the company has supplied close to 20 million concrete sleepers for the German railway network.

"One of the biggest challenges for us was to understand the synergies the cultural differences. In the beginning, there were a lot of anxieties in the German side about the acquisition," says Mittal.

Recently, RAIL.ONE underwent a restructuring, whereby German operations have been separated into a new entity, and a holding company, called PCM RAIL.ONE Group, has been created for all the subsidiaries of the company. Prior to the acquisition, PCM Group's overseas operations were limited to Saudi Arabia, the UAE and Bangladesh. However, post the acquisition, it has footprints in Romania, Spain, South Korea, Hungary, Turkey, the United States, apart from Germany.

The re-shaping of the company's organization was a step towards facilitating future international growth and market concentration. The holding entity, which provides marketing, R&D, business development as well as strategy and group controlling, is helmed by Jochen Riepl and a supervisory board consisting of PCM family members.

In the next two to three years, PCM RAIL.ONE is looking at an investment of around Euro 30 million, according to Mittal.

Some of the ongoing projects of the company include one in Aschaffenburg (Bavaria/Germany), where PCM RAIL.ONE is setting up a new plant with a capacity of 600,000 sleepers per year. In the future, the new site in Aschaffenburg will be the logistic center for sleeper delivery in western Germany. In the Middle East, the company is delivering prestressed concrete main line sleepers for North South Project, which covers a length of 2,400 km. This apart, it is also pursuing large-scale projects in Scandinavia (up to 800 km of high-speed lines). This apart, the company is also engaged in a number of projects for Indian Railways.