Wagon industry running out of steam as Railway orders dry up

The domestic wagon industry, stuck with its sole client – the Indian Railways – appears to be running out of steam in the present economic situation.

Procurements have dwindled affecting profitability and creating over capacity. During the economic slowdown, corporate orders first dried up; after 2009-10, the own-your-own wagon programme got derailed for want of takers among the bulk commodity users.

The industry’s attempts to diversify into Railway coach (EMU/MEMU) manufacturing also faced mid-course troubles, as the Railways put brakes on its long-term capacity building plans.

The top two industry players currently could achieve around 20 per cent of their turnover by diversifying into non-Railway businesses. Incidentally, corporate orders for wagons in four years to 2010 totalled 10,000 units. The industry received the last order of 17,000 wagons for 2011-12 from the Railways.

According to industry sources, beginning Q4 of FY12, the release of orders continued till Q1 of 2013-14, when Cimmco Ltd one of the three listed players — received an order for 514 wagons. Texmaco Rail — the largest among over half a dozen local players — got the biggest order of 3,915 units.

Texmaco Rail, with a capacity of 800 units-a-month, took 4-5 months to execute the order in 2012-13. Since then, its wagon production capacity has been idling. Texmaco has decided to focus more on exports and diversification in view of the erratic procurement programme of the Railways and substantial under-utilisation of capacity set up with significant capital cost.

Some of the industry players had identified exports and diversification into related structural engineering businesses as the alternative route to keep their business wheels running.

Last fiscal, 31 per cent of Texmaco Rail’s turnover came from exports, which helped maintain its profitability during 2012-13. But, Titagarh Wagons Ltd, with insignificant exports, saw its operating profit decline 54 per cent last fiscal. Industry watchers think gaining a firm footing in the export market takes time. “Overcoming cross border tariff and technology hurdles are major constraints,” said a senior official of an industry unit.


TWL, through the acquisition of an ailing but technology-rich French unit, has been trying to be on track in the highly competitive European market for the last three years. It met with moderate success.

“There is future potential for turning this unit as TWL’s technology engine. It may also help it in accessing other markets such as Africa or Latin America,” an analyst remarked.

Cimmco Ltd, which recovered from its sickness in 2011-12 to make a profit of Rs 4.19 crore, reported a loss of Rs 10 crore in 2012-13 for want of adequate orders. Now, controlled by TWL, Cimmco employs 450 at its manufacturing unit. “Increasing cost of manufacturing is also an issue that is affecting the margins,” an industry insider said.

Umesh Choudhary, MD, TWL, said the plans that had been taken up in the last few years for diversification and collaboration related to Indian Railways purchases, had to be shelved.

Listed players such as Texmaco, TWL and Cimmco have been hovering a little above their year-lows and way below their year-highs.

Smaller unlisted players such as Burn Standard, Braithwaite and Jessop, who entirely depend on Railways, however, are most-affected due to lack of orders.



Texmaco to roll out rail coaches next year

Wagon-maker Texmaco Rail & Engineering Ltd hopes to roll out first batch of railway coaches after a year.

According to the company’s Chairman, S.K. Poddar, the Rs 60-crore first phase project work is expected to be completed by second quarter of 2013-14. “The construction work at Sodepur (near here) is on,” he said.

In the second phase, the unit would go in for manufacturing of metro coaches.

The company, now a part of SK Poddar-controlled Adventz group, also expects to commission the manufacturing facility of its equal joint venture with UGL of Australia. This unit, located nearby, is for locomotive bogie frames, head stocks for coaches, platform & cabs, and wagon components. The joint venture at present is capitalised at Rs 72 crore.

The company has also formalised a 50:50 wagon leasing joint venture with its French partner Touax Rail.

To begin with, the joint venture NBFC will have a minimum net worth of Rs 25 crore and 2:1 debt-equity ratio.

The group’s other company Texmaco Infrastructure & Holdings Ltd is gearing up to develop 9.6 acres of prime land in the Capital. This is part of the total 24 acres that once housed Birla Cotton Mill.


Published in: on September 1, 2012 at 8:33 am  Leave a Comment  
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Texmaco to make Metro coaches

Kolkata, July 23 (IANS) KK Birla group company Texmaco Ltd is in the last leg of finalising a joint venture with three Japanese companies led by Kawasaki to make Metro rail coaches, a top official said here Thursday.

Texmaco will be part of the alliance through its newly formed 50:50 joint venture with the United Group of Australia.

Toshiba and Itochu are the other two Japanese partners in the project.

“The total investment will be Rs.300 crore, which would be used for setting up a greenfield plant near Kolkata,” Texmaco chairman Saroj Kumar Poddar told reporters on the sidelines of the company’s annual general meeting.

Texmaco’s Australian joint venture will invest another Rs.100 crore to make specialised stainless steel wagons, Poddar said.

“We are anticipating that we will have less than 50 percent share in the joint venture with the Japanese consortium,” said company president and chief executive Ramesh Maheswari.

A memorandum of understanding has been signed with the Japanese consortium.

Texmaco, which is predominantly engaged in wagon manufacturing, has a 30 percent market share, and has an order book of Rs.1,800 crore.

The company will raise around Rs.150-200 crore through qualified institutional placement (QIP) routes soon.

“The QIP would meet our immediate investment plans for our project with the Australian partner,” Poddar said.

The company posted a profit after tax of Rs.20.84 crore for the first quarter this fiscal.


Published in: on July 23, 2009 at 4:39 pm  Leave a Comment  
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