In negotiations for a project in Tunisia; plans to tap Saudi Arabia, too.
Titagarh Wagons Ltd (TWL), one of India’s largest private sector rail wagon manufacturers, is looking at expanding its operations into the West Asian market after having acquired the assets and business of Arbel Fauvet Rail (AFR), France. The acquisition was announced this week.
J P Chowdhary, chairman of TWL, said: “AFR has a strong presence in the European market; it has done business in Africa as well. We will now focus on expanding our footprint in the Middle East, particularly in the Gulf countries, to ramp up our operations on a global scale.”
This is the first acquisition abroad by TWL and the first of its kind in the sector. Negotiations are on for a project in Tunisia. “Rail connectivity projects are aggressively being developed in West Asia and the markets there are easily accessible from France. The details of the project in Tunisia are being finalised. We are also looking at developing business in Saudi Arabia,” added Umesh Chowdhary, managing director.
AFR’s facility at Douai in Northern France will cater to projects in the international market. Additionally, components for manufacturing wagons and locomotives will be exported from TWL’s plants in India to bring down production costs and speed up delivery of consignments.
TWL will invest ¤13 million (Rs 78.5 crore) in providing the loss-making AFR with working capital. “We acquired the assets of the company for around ¤2 million (Rs 12 crore). The deal also gives us access to AFR’s patented designs, which will help us manufacture specialised wagons for the Indian market,” said J P Chowdhary.
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Titagarh had cash and bank balances of Rs 106 crore at the end of March 2010. Its debt was negligible, compared to its equity (debt: equity ratio of 0:1), which leaves enough room for the company to raise resources from financial institutions to fund the acquisition. AFR would increase TWL’s capacity by over 50 per cent and eventually enable the company to manufacture up to 5,000 wagons per year for the European market.
Titagarh’s revenues were Rs 554 crore in 2009-10, with a net profit of Rs 65 crore. The company has a market capitalisation of Rs 700 crore. It recently acquired 50 per cent stake in Cimmco, a S K Birla venture for manufacturing rail coaches.