Shares of vendor companies fall as government keeps orders for new wagons static, banks on PPP model.
The share prices of companies catering to the railways, which had witnessed a sharp rise during the past couple of weeks, fell sharply today after the railway budget failed to meet market expectations.
The market was expecting that the government would double its order for railway wagons this year to around 40,000, to be executed by companies such as Texmaco and Kalindee Rail Nirman. The sentiment turned negative as Railway Minister Mamta Banerjee kept the order for new railway wagons static at last year’s level of 18,000.
| OFF THE TRACK | ||
| Stocks | Current (in Rs) | Fall* (in %) |
| Titagarh Wagons | 378.30 | 6.70 |
| Texmaco | 142.25 | 4.70 |
| Stone India | 60.60 | 5.00 |
| Kernex Microsystems | 151.75 | 5.00 |
| Hind Rectifiers | 68.59 | 4.80 |
| Kalindee Rail Nirman | 183.50 | 5.00 |
| BEML | 1046.05 | 1.70 |
| *over the previous day Source: BSE | ||
The share prices of Kalindee Rail Nirman Engineers, Simplex Casting, Kernex Microsystems, Titagarh Wagons, Texmaco, Stone India, BEML and Hind Rectifiers fell 1-7 per cent on the Bombay Stock Exchange (BSE). A majority of these companies’ work is done for the railways.
“The railways are facing an acute shortage of wagons and so market players were expecting that the government would double the order for new wagons. The market was also expecting that the government would announce a railway line between India and Nepal, something the railway ministry has been planning for long,” said Kishor Oswal, managing director of Mumbai-based CNI Research.
The announcement that railway projects would be implemented through public-private partnerships (PPPs) also turned the market sentiment negative. “In the normal course, big railway projects go to a handful of existing players in the listed space, but the PPP model may result in delays as new manufacturing units will have to be set up. The tendering process could lead to delays,” said SP Tulsian, a Mumbai-based independent equity advisor.
Tulsian said the sentiment had turned negative only in the short term and the railways were going to spend heavily on the freight corridor project, for which land acquisition was in progress. “Apart from meeting the acute shortage of wagons, over 1,000 km new lines are to be laid shortly. So, orders will have to be placed with existing companies till the PPP model is ready. So, the budget has been positive overall,” said Tulsian.