Titagarh Rail Systems Expects Rs 8,000 Crore Revenue From Passenger Segment In Five Years

Titagarh Rail Systems is gearing up for substantial long-term growth despite facing short-term challenges. Umesh Chowdhary, the Vice Chairman and Managing Director, commenting on the first quarter results emphasised the importance of evaluating the company’s performance over a multi-year horizon rather than focusing on quarterly earnings.

“I believe it’s more meaningful to evaluate our performance over a three-year horizon rather than on a quarterly basis. Until March 2019, our average annual revenue was about Rs 300 crore. Over the next three years, we increased that to Rs 1,000 crore annually. Last year, we achieved around Rs 4,000 crore in revenue, with 85-90% coming from the freight business,” said Chowdhary.

A key focus for Titagarh Rail Systems is the expansion of its passenger segment, which Chowdhary believes could account for a significant portion of the company's revenue in the coming years.

“Once we reach our target of 70 coaches per month, or roughly 800 coaches per year, with each coach costing about Rs 10 crore, the potential revenue from the passenger segment could be around Rs 8,000 crore in about five years. However, this projection is contingent on factors such as execution and order book fulfilment,” he said.

“As our freight business continues to grow, the passenger segment will begin to contribute significantly, with the potential to account for 60% of our overall revenue. Essentially, if we consider that 60% of our potential corporate revenue is currently at zero, that’s the lens through which we should view the company over the next 3-5 years,” Chowdhary said.

When asked about the future revenue split between the passenger and freight segments, Chowdhary said, "In terms of capacity, our freight division is projected to reach 12,000 wagons, which translates to around Rs 4,500 to Rs 5,000 crore in revenue. On the passenger side, we produced an average of three coaches per month last year.

"However, we are aiming for an output of 30-40 coaches per month, and eventually scaling up to 70 coaches per month. We expect to achieve this full capacity within the next four years," he added

The company’s order book as of June 2024 shows a nearly balanced split between rolling stock for freight at 51.9%, and passenger at 48.1%. Looking ahead, Chowdhary expressed confidence in the company’s ability to recover from a slightly underwhelming first quarter.

Chowdhary explained that the passenger segment's performance was affected due to the delayed start of production for the Bengaluru-Ahmedabad route. Although the company missed its the first quarter's targets due to circumstances like the heatwave and elections, Chowdhary expressed confidence in making up for the shortfall in the upcoming quarters.

"We recorded a 13% volume growth in the freight segment during April-June quarter compared to the same period last year. Production for the Bengaluru-Ahmedabad route in the passenger segment is expected to start in the second or third quarter."

In the first quarter of the current financial year, the company produced around 700 wagons per month, and it aims to reach an average of 900-950 wagons per month for the remainder of the year, according to Chowdhary.

Earlier, the projection was for 1,000 wagons per month. So, does the 900-950 range indicate a downward revision in targets? Chowdhary clarified, "1,000 wagons is still the target, but 900-950 is the expected average due to factors like holidays and festive seasons. However, the goal remains 1,000 wagons."

In the June quarter, Titagarh Rail Systems reported a 0.9% decline in revenue to Rs 903 crore, down from Rs 911 crore in the same quarter a year ago. Net profit, however, rose 8.4% year-on-year to Rs 67 crore. Its Ebitda fell 4% year-on-year to Rs 102 crore, with the Ebitda margin narrowing slightly to 11.3% from 11.6% in the preceding fiscal.