COVID-19 didn't hit Railways business hard, more orders expected: Texmaco Rail deputy MD Ashish Gupta

#capital expenditure, #Covid-19, #Indian Railways, #pandemic, #railways, #regulator, #Rolling Stock

Ashish Gupta.

India’s market for rolling stock, or railway wagons, coaches and locomotives, has completely recovered from the impact of COVID-19, and the sector is now looking at even more orders from the massive expansion planned by the network, Ashish Gupta, Deputy Managing Director, Texmaco Rail & Engineering told Moneycontrol in an interview.

He said procurement by the Indian railways remained strong despite the pandemic, and the company is eyeing opportunities in bidding for tenders in setting up of The National High Speed Railways, metros, and the dedicated freight corridors.

He also said an independent regulator was need for public-private partnership to work in the railways, and entry of the private players in train operations will significantly expand the market.

Edited Excerpts:

Railway operations took a massive hit from COVID-19. How has that affected the Indian Railways’ tenders for rolling stock?

COVID-19 did not have a major impact on the Indian Railways’ orders for new rolling stock, because, even during the outbreak of COVID-19 the railways was the first type of public transport that became operational.

The Indian Railways last year extended the old contracts for both wagons and locomotives last year, but there was some delay in procurement of wagons.

The Indian Railways recently came out with a 9,000-wagon tender, so COVID-19 has not impacted procurements much, especially because the railways is looking to expand its cargo segment.

The railways in its National Rail Plan is looking at a massive expansion and we are very upbeat about more orders coming in. There’s going to be a lot of replacement demand for rolling stock and with the dedicated freight corridors coming up, there should be more demand for rolling stock.

What percentage of your revenue is back to pre-COVID levels?

In Jan-Mar our revenues were back to pre-COVID levels. We did around Rs 600 crores of turnover in Q4 of last year.

Apr-Jun was again hit by the second wave of COVID-19 but I think by the middle of Oct-Dec we should be back to pre-COVID levels in terms of our revenues.

What is the current pending order book that the company has and by when do you expect this to be delivered?

My total order book currently stands at around Rs 3,400 crores out of which Rs 1,800 crores is made up of orders for rolling stock.

We started the year with an order book of Rs 1,800 crore for rolling stock and will look to supply the entire order book by the end of 2021-22. We are also expecting more orders which will add to this.

The government’s National monetization pipeline has a number of railway assets, but public private partnership has not really been successful in the railways. How can this be addressed?

I’ll give the example of the telecom sector, when telecom opened up in India to private players, there was no Telecom Regulatory Authority of India (TRAI).

Things started to happen when the regulator came in place.

Indian Railways is both the regulator and a competitor in its entire business. So for PPP models to succeed, that is the fundamental change that is required so that the goalposts on policies are not shifted and the people who have invested money have somewhere to go if there’s a problem.

The biggest confidence booster for the industry would be an Independent regulator.

Is the company looking to further diversify its operations and get into railway operations, either in passenger or freight train operations?

No, we don’t have any plans to enter into train operations, but we are actively looking at policy direction on contractual operating services like track maintenance and other services which may open up in the future.

We are actively looking at rolling stock maintenance, track maintenance, signalling maintenance, etc.

We are also very upbeat on the potential of our business in the engineering, procurement and construction space, basically railway electrification and the expansion of the railway networks both dedicated freight corridors, metros, and the National High Speed railways. We’re also looking at options in the urban mobility space.

And we are also looking at export markets in a big way, especially Africa where we have supplied earlier as well. So that is something we would like to leverage in the future. We would also like to see to that in the next three to four years 10 to 15 percent of our revenues come from exports.

How would the entry of private players affect the rolling stock market in India?

There will be a lot more opportunities to produce rolling stock both the coaches and also the locomotives with the entry of private players in the market and them setting up separate trains. That would open up a lot of the market for production of locomotives and passenger cars.

Potential bidders who will look to operate private trains will only enter the segment with a long-term view, and that will bring in a number of orders for new rolling stock in the market.

Currently around 14 percent of our rolling stocks orders are made up of orders from private players, and I would say in the next two to three years 20-25 percent of our orders are expected to come from the private sector.

The national high speed rail project has started issuing tenders for projects. How confident are you of winning these projects?

We have bid for one tender already. So because it’s a tender process, it’s very difficult to say the chances of winning. We are one of the few people who qualified to do these jobs. And there are a lot of tenders coming up.

It is a big focus area for us projects like in the metro space, especially the ballastless tracks is a very interesting space and we have a niche in these tracks as well. So, we will be bidding for many more contracts coming up soon both in the National High speed and also the metro rail projects.

What are the steps taken by Texmaco to cope with the outbreak of COVID-19? And how will a third wave affect a company’s business?

We were very well prepared for the second wave in terms of our operating practices and our isolation mechanisms, but we did not anticipate that they will be a shortage of oxygen. We lost 45 days during the outbreak of the second wave of COVID-19 due to shortage of oxygen across India.

And I think even if the third wave comes, I think there will be no shortage of oxygen because I think the country is quite well prepared.

All our employees even including our contract labour have been vaccinated with at least one dose of vaccine.

We don’t allow people who are not vaccinated to enter the factory.

How is the company looking to expand its steel foundry business?

We did some capex last year, acquired some machines to make crossings and all and so, we are now looking at expanding into the American market.

We will be targeting more and more SAS products outside India and in terms of total capacity, you know because we recently acquired the factory and so there are no further plans to acquire any capacity.

But we will certainly research and you know, cater to the better product mix.

The Indian Railways is looking to start operating hydrogen powered trains, how will this be implemented in the next few years? What are the biggest hurdles the government faces?

Hydrogen-based trains will only impact the locomotive market in India and won’t impact the other rolling stock.

However, with the move toward faster trains and more efficient trains the need for more high capacity wagons which can run on higher speeds will arrive.

To that extent we are constantly developing new design. I also expect the railways in India to move towards transporting goods in closed wagons unlike the open wagons that are being used right now, so that there is no fugitive dust emissions when trains move through cities, towns and villages.

How have high commodity prices of steel, and other raw materials. seen in the past six to eight month, affected your operating margins?

Most of our railway contracts come with a price-variation clause, so most of our contracts have a hedge when it comes to contracts from the Indian Railways.

We have also been talking to our customers to take some price increase. We are trying to use data analysis to buy raw materials judiciously and mitigate the impact of the high raw material prices.

We have done a lot of improvements internally to manage the product yield and also reduce wastages.

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