If you only read what the government intends to do for the country's railway sector, you would stagger to the phone line and call your broker. For all those who avoided the fine print coming out of the government across the last month, here is a condensed recap.
The government has introduced reforms to accelerate road and rail throughput; it has evolved its focus from project award to project completion. The speed of broad gauge line building is expected to increase from 4.3 km a day to 19 km a day by 2018-19.
The Indian Railways intends to quadruple investment in five years by focusing on de-congestion and new-line construction. India intends to invest Rs 8.5 lakh crore in its railways in five years starting 2016. And, engineering, procurement and construction opportunities constitute the largest part of the railways investment plan (46 per cent of FY17 outlay).
There are about 1,200 bridges needing to be rehabilitated in India. The country intends to invest in 917 road under-bridges and over-bridges to replace 3,438 railway crossings for Rs 6,581 crore; the government has sanctioned projects of 7,000 km of double/third/ fourth lines.
In five years, the Indian railway market is likely to emerge as the world's third largest, accounting for 10 per cent of the global market (Metro Rail likely to be 70 per cent of the Indian railway market as it extends from metro cities to Tier-I / Tier-II cities).
I would have said 'nice story' because all our railway rolling stock companies are without orders, except for some interesting stirrings. Industry sources tell me of a dramatic turnaround; Railway general managers have been empowered to commission projects considerably larger than in the past; they have turned excellent paymasters; they commission projects with a clear paying visibility of quite a few months of project completion.
Whoa!
Now comes the difficult part. Possibly the largest infrastructure in the country enjoys one of the lowest exposures on the country's secondary markets. The few stocks that are visible are asset-heavy with a slightly hazy play on how their respective stories will evolve.
The one company that looks like an interesting proxy is GPT Infraprojects. Because most people don't even think it has anything to do with the country's railway sector (which is why there is still some value left in it). Because it is not listed on the National Stock Exchange and, hence, off the radar of most people. Because it is tucked away in Kolkata (which is near Siberia, you know). Because the company is one of the largest steel bridge companies in India. Because the company consciously chose not to grow over the past couple of years when contract bidding declined to un-remunerative levels. Because orders are back around the company's preferred hurdle margin rate. Because the company has already bagged Rs 1,800 crore in orders to be progressively liquidated in the next 30 months. Because even in the worst of days, the company continued to report an attractive earnings before interest, taxes, depreciation and amortisation margin.
My company paid me a bonus for my hard work a few days ago. I think I am going to buy some GPT Infraprojects stock with that money.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed
