Rail stocks rally: RVNL, IRFC, TexRail surge up to 15% on July 08; check why

The GoI is focusing on improving the railway infra and ensures faster development and completion of tracks, rail electrification, rolling stock manufacturing and delivery of passenger freight services

Shares of railway related companies continued their journey north, surging by up to 15 per cent on the BSE in Monday’s intra-day trade amid heavy volumes in otherwise a subdued market. In past two trading days, these stocks have zoomed by up to 36 per cent on healthy business outlook.

Rail Vikas Nigam (RNVL), Indian Railway Finance Corporation (IRFC), IRCON International, BEML, RailTel Corporation of India and Texmaco Rail & Engineering (TexRail) has rallied between 4 per cent and 15 per cent in intra-day trade today. In past two trading days, theses stocks have soared in the range of 15 per cent to 36 per cent. In comparison, the BSE Sensex was down 0.11 per cent at 79,912.

 

The up move in railway stocks on Monday, July 8, came on the back of news reports that thhe government may focus on hiher allocation for this sector in the upcoming budget on July 23. 

Recently, Minister for Railways Ashwini Vaishnav's unveiled plans for 2500 new general passengers coaches, and 10,000 additional coaches.

The government, meanwhile, is focusing on improving the railway infrastructure and ensuring faster development and completion of tracks, rail electrification, rolling stock manufacturing and delivery of passenger freight services. The budgetary allocation towards railway projects have been increased to Rs 2.55 trillion for 2024-25 from Rs 2.40 trillion in the previous year.

Among the individual stocks, RVNL, the state-owned company, hit a new high of Rs 567.60, surging 15 per cent in intra-day trade on July 8. It zoomed 36 per cent in past two trading days. At 10:31 am, the RVNL stock was trading 13 per cent higher at Rs 557.05 on back of two-fold jumped in average trading volumes. A combined 81.94 million shares changing hands on the NSE and BSE.

RVNL is engaged in the business of implementing various types of Rail infrastructure projects assigned by Ministry of Railways (MoR) including doubling (including 3rd/4th lines), gauge conversion, new lines, railway electrification, major bridges, workshops, Production Units and sharing of freight revenue with Railways as per the concession agreement entered into with MoR. With RVNL’s growth as a major provider of a variety of rail infrastructure, there is an opportunity of securing rail infrastructure projects overseas.

Shares of IRFC hit a record high of Rs 206, rallied 6 per cent on back of four-fold rise in the average trading volumes. A combined 158.69 million shares were changed hands on the NSE and BSE.  The stock of state-owned financial institution company has bounced back 36 per cent from level of Rs 151.20 on June 4.

On May 29, S&P Global Ratings revised its rating outlook on the IREC to positive from stable. The positive outlook on lRFC mirrors the outlook on India. “We see an almost certain likelihood that the Indian government will provide extraordinary support to the company if needed. The ratings on lRFC reflect the company's critical role and Integral link with the government,” global rating agency said in rationale.

Ongoing governmental support--in forms including guarantees, budgetary support, and lease agreements--supports timely debt payment. S&P Global Ratings believes lRFC will continue to play a critical role in the Indian government's economic development plans and policies.

IRFC, play a strategic role in supporting the Indian Railways Infrastructure Development Plan. The company has emerged as the primary market borrowing arm of Indian Railways to meet their entire extra budgetary resource requirements for capex funding, whether it is rolling stock or railway infrastructure projects. Apart from funding Indian Railways, IRFC have a mandate to finance projects, which have a backward and forward linkage with railways.

Shares of Texmaco Rail &Engineering hit a new high of Rs 295.65, rallied 8 per cent on the BSE in intra-day trade today. In past two trading days, it surged 16 per cent.

TexRail has an installed capacity of 10,000 Vehicular Units (VUs) of wagons which remains flexible in nature, 20,400 MTPA of structurals, 10,000 MTPA of bridges and 42,000 MTPA of steel castings. Besides domestic market, TexRail also has presence in overseas markets.

TexRail had a healthy order book position of Rs 7,878 crore as on April 01, 2024. The order book includes orders of Indian Railways (Rs4,376 crore) along with orders from private players for wagons, other rolling stocks, bridges, structural, steel foundry, order book of KRN division (Rs 694 crore) and BPPPL division (Rs 1,132 crore).

"Railways are the largest consumer of wagons in the country. The outlook for the wagon industry is mainly dependent on the demand from the same and the budgeted allocation for such outlays. This has resulted in the recent influx of orders from GoI for freight wagons. Apart from supplying wagons to railways, TexRail has been receiving large orders for commodity specific wagons from private sector companies. TexRail, with large capacity for manufacturing these wagons, is well placed to take advantage of this growing demand," CARE Ratings said in rational.