Indian order book of Titagarh Wagons stands at around Rs 2,600-2,800 crore: Umesh Chowdhary, VC & MD

Umesh Chowdhary, Vice Chairman & Managing Director, Titagarh Wagons Limited, talks about the tender for 8,875 wagons floated by Railways, current and expected orderbook, inorganic growth opportunities, CapEx and expansion plans as well as the performance of the Italian subsidiary among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

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Q: Let’s start with the latest news that is good for the sector as well as you. It is being reported that Railways has floated a tender to buy 8,875 wagons at an estimated cost of Rs 2,700 crore. What does it mean for your company and what will your participation in it?

A: We believe, and I have always been saying that in the last five to seven years railways, the NDA Government, has invested in building infrastructure in a way that it has created a capacity and when they would need to utilize the capacity and service it then they will require more rolling stocks. We project that these 8,800 wagons are not sufficient amid the loading targets the Railways has fixed for itself. As the Railways has been saying that they will have to buy about 20,000 wagons annually for the next several years if they want to meet their traffic projections. But this is a great start. The tender for the wagons that have been submitted in the recent past is a good start and I believe that going forward, the quantities of the offtake of the railways or the wagons that are bought under the private scheme will increase further. 

Q: On average what is the annual procurement for wagons by Indian Railways every year and by when do you think that the number will reach the 20,000-mark? Also, what will be your participation in it?

A: In Wagon tender, our capacity and production are the highest in India. As per the RDSO’s assessment capacity, we can produce 8,800 wagons annually. So, of course, we will participate in whatever wagon tenders are out. However, it is hard to guess, when the tenders for these 20,000 wagons will be out but I believe that it will be sooner than later because the investments that have been made on the dedicated freight corridors is about to be complete. So, with all these things, an environment, infrastructure and a backbone have been created for additional freight loading. Railway’s capacity utilization comes only from freight loading or passenger loading and rolling stock is needed for the purpose. 

Q: Where does your orderbook stand at present and what is the execution timeline for the same? What is the break-up between Indian and International orders?

A: Our Indian orderbook, I am speaking from the memory based on the last results that we declared, stood at around Rs 2,600-2,800 crore, which was well divided among our all-business segments, freight wagon, passenger coach, which is metro and propulsion among others. As far as European orderbook is concerned, it is also standing around Rs 2,000 to 2,500 crore for our Italian subsidiary. Many tenders in which we have participated are in pipeline in Europe as well as in India. Few of the existing orders will be completed this year and some orders will be carried forward to the next year. But all of these orders will be executed within this and the next financial year. 

Q: What is your view on the additional orderbook, i.e., how many more orders are you expecting where you would bid and how many of the tenders are opening in different states as well as the central government level? 

A: If I will have a look at different businesses or verticals then we have discussed the wagons right now. The second important vertical for us is of the passenger coaches and as you know that the Pune metro’s first train was flagged off last month from Italy. The first of the three trains are coming from our Italian factory and the remaining 31 trains will be manufactured at the Indian factory. Its production has started in India as well and the first train from the Indian factory will be supplied by December this year or January next year after which we will ramp up it at the earliest and bring it to a delivery of 3-4 trains per month. So, in the metro segment, many metros have been sanctioned and several are in pipeline. So, I feel that the metro segment will be a big growth driver for us, the metro or the modern passenger train segment. As far our third business, which is shipbuilding or defence is a niche segment and the volumes will not be equal to the rest of the two as far as topline is concerned. But as it is a niche segment, so, we will get a better margin in it, which helps us in balancing those. So, for all these three segments, I believe that the infrastructure spent from the central government or states will be quite strong in the coming time and we as Titagarh have prepared ourselves well in all these three segments to participate in this growth opportunity. 

Q: Are you looking forward to any inorganic growth opportunities, if yes, do you have any interesting prospects on which you might take an action? Can we assume that you will aggressively look towards the inorganic route?

A: Not at present because we have increased our existing capacity a lot. The CapEx spend that we have done in the last two to three years on our technology, capacity and to increase our capability, first, we would like to leverage it in the next two to three years. However, as a company and a group, we always keep our minds open and if we will get any compelling opportunity then we will definitely relook onto it. But currently, we don’t have any massive inorganic growth plan in our business plan. 

Q: You have talked about CapEx and expansion. What would be your CapEx for the next two to three years? Also, how your Italian subsidiary is performing as we saw it turn EBITDA positive in recent earnings. Can we expect the performance improvement to continue?

A: As far as Indian capacity enhancement and CapEx or margin is concerned, we have established our metro production plant and aluminium body metro will be prepared here. This is the first time in India when Aluminium metro coaches are being developed. So, this is a continuous process and we continue to upgrade ourselves and our factory is being created from Industry 4.0 standard. We want to do international accreditation for all the facilities we have so that we can participate in the export and international market. As far as the EBITDA margin is concerned, in Indian businesses our EBITDA margin stands between 8-10%, in few quarters it remains 1-2% lower or up from it. But if you have a look at the blended 7-8 quarters then it hovers around 9%. As far as the European unit is concerned, as we all know that Italy was badly impacted by the COVID outbreak and was one of the world’s affected countries. Fortunately, the conditions are coming back to normal there and in December 2019, we turned EBITDA positive there but again COVID hit the country from January onwards due to which we had to bear a lot of losses but in June 2021, as you said earlier, we turned EBITDA positive. This year in FY2021-22, we will remain EBITDA positive and in FY2022-23, I believe that we will be at the net level we will be positive.