Rail stocks in demand: Titagarh, IRCON, RailTel, RVNL rally up to 19%

The Indian Rail Freight Industry is experiencing significant growth and improvements, with ambitious plans and increased investment aimed at enhancing capacity, efficiency, and sustainability

Shares of railway related stocks were in demand Friday and rallied up to 19 per cent on the BSE due to heavy volumes in an otherwise subdued market.

Titagarh Rail Systems (TRSL), IRCON International, RailTel Corp, Rail Vikas Nigam (RVNL), RITES, Texmaco Rail & Engineering, Indian Railway Finance Corporation (IRFC) and Jupiter Wagons were up between 5-19 per cent.

In comparison, the S&P BSE Sensex was down 0.23 per cent at 65,828 at 01:56 PM.

According to media reports, the railway Minister Ashwini Vaishnaw on Thursday said he is working on a plan to introduce 3,000 new trains in the next four-five years to raise the railways' passenger capacity from 800 crore at present to 1,000 crore.

The railways likely to add 200 to 250 new trains every year and these are besides 400 to 450 Vande Bharat trains, which are going to be added in the coming years, PTI reported.

Shares of  TRSL soared 19 per cent to Rs 994.95 led by an over 10-fold rise in average trading volumes. A combined 12.1 million equity shares, representing nearly 10 per cent of total equity of the company, changed hands on the NSE and BSE.

The company offers mobility solution to billions with its prominent presence in both the passenger and freight rail systems including railway wagons, components, passenger coaches (EMU/MEMU) and Metro Coaches.

TRSL’s order book remains strong (around Rs 28,000 crore), and the railways growth trajectory also looks strong.

The company’s management believes that there should be good traction for the freight rolling stock business or freight wagon business in the years to come.

The significant progress in metro services, introduction of Vande Bharat Express and strategic investments in rail infrastructure bodes well for the future development and sustainability of India's transportation networks, TRSL said.

The Indian Rail freight industry is also experiencing significant growth and improvements with ambitious plans and increased investment aimed at enhancing capacity, efficiency, and sustainability.

Annual freight target is expected to increase from 1400 million (mn) tonnes to 3000 mn tonnes by 2027 implying an increase in the wagon fleet from current 336,900 to 500,000 by 2027, said TRSL in its FY23 annual report.

Additionally, plans are underway to develop 100 PM Gati Shakti Cargo terminals for multimodal logistics within the next three years.

The wagon industry, which previously faced challenges due to under-utilization of capacities, is expected to witness improvement with substantial orders from Indian Railways and the private sector.

With the commissioning of dedicated freight corridors and a goal to increase the share of freight transport through railways, the Indian Railways plans to procure 90,000 wagons by 2025, which is the largest in history and it is nearly 5 times the number of wagons procured by railways in a year, the company said.

Shares of RVNL gained 6.5 per cent to Rs 168.70 on back of nearly five-fold jumped in average trading volumes. As many as a combined 42.83 million equity shares changed hands on the NSE and BSE.

In exchange filing, RVNL said the rating agency CARE Ratings assigned CARE AAA rating for its long term/short term bank facilities with a stable outlook.

The ratings assigned to bank facilities of RVNL continue to take into account RVNL’s strong managerial and financial linkages with Government of India along with 72.84 per cent ownership.

The rating also derives strength from RVNL’s significant execution capabilities in the railway segment and its strong orderbook position as on June 30, 2023 with about 60-65 per cent of the projects from the govt on a nomination basis having a cost-plus margin structure, CARE Ratings said in its rationale.

While domestic railway projects are now being tendered through govt's competitive bidding system, the revenue visibility continues to be strong for about three years.

RVNL has started bidding in competitive landscape and has been able to secure more than Rs 24,000 crore worth of projects in both railways and other segments.

RVNL has secured an order of manufacturing Vande Bharat trains in a joint venture with Russia-based railway’s rolling stock manufacturer “Metrowaganmash” wherein RVNL has about 25 per cent share.

The project entails manufacturing and maintenance of 125 Vande Bharat trains over a period of 35 years.

"Although the manufacturing project shall be a new territory for RVNL altogether, the demonstrated track record of the joint venture (JV) partner shall be supporting the order execution to an extent", the rating agency said.