Railway Budget: Record outlays may benefit a host of cos

Armed with a cash surplus of Rs 25,000 crore, the Indian Railways hasannounced several initiatives towards easing infrastructurebottlenecks in the Railways. These moves may open up a host ofbusiness opportunities for many companies.
Backed by the largest ever annual plan outlay of over Rs 37,500 crore,the Railways Minister's growth initiatives appear promising.Rolling stock
The Budget has laid down plans to procure an all-time high number of20,000 wagons, 250 diesel and 220 electric locomotives for the comingyear. This opens up sizeable potential revenues for wagonmanufacturing companies such as Texmaco, BEML and Titagarh Wagons (thecompany has recently filed for an initial public offering with SEBI),which derive a significant portion of their revenues from themanufacture of wagons for the Railways.
Besides revenue growth, these companies may also benefit by way ofmargin expansion over the long-term, given the proposal to migrate tohigh-end stainless steel wagons starting from 2011. The Government'sfocus on setting up public-private partnerships to furtherinfrastructure growth may also help keep the demand for wagonsbuoyant.
That apart, introduction of a wagon leasing policy and the wagoninvestment scheme may reduce the capital outgo for the buyers andboost demand. Nonetheless, this could also breed competition. Attemptsby established foreign players such as General Electric, Alstom andBombardier, with a superior technology backup to expand theiroperations in the Indian market, may raise competition for existingplayers.
In this context, the fact that Indian companies enjoy access to lowermanufacturing cost offers some respite.Freight corridors
Kalindee Rail Nirman, a frontrunner in railway related infrastructureworks such as construction of new line and gauge conversion, maybenefit significantly from the setting up of dedicated freightcorridors by the Railways. This may translate into topline growth forthe company from the next financial year, with the work on both theEastern and Western dedicated freight corridors slated to begin by2008-09.
The thrust on setting up of freight corridors, rail-port connectivityand increased investments expected in container rolling stock andinland container depots by Container Corporation and other operatorsmay also open up opportunities for logistics players such as GatewayDistriparks and Allcargo Global.
With newer schemes in place for procuring wagons, these players may beable to expand at a faster rate. This could have marginally negativeimplications for Container Corporation, which stands to lose itsmonopoly in rail logistics. The proposal to form special purposevehicles to establish rail links to ports such as Mundra, Kandla andKrishnapatnam may help Mundra Port and SEZ scale higher growth by wayof improved connectivity.Other initiatives
Kalindee Rail Nirman may also benefit from the railways' target to setup new lines spanning 350 km and gauge conversion for over 2,150 km.Notably, these have been planned for an outlay of Rs 1,730 crore andRs 2,489 crore respectively.
Further, the Government's focus to strengthen railway safety throughautomatic devices such as anti-collision device (ACD) and signal andtelecommunication (Rs 1,520 crore) also holds potential. Companiessuch Kernex Microsystems, which manufactures ACDs and other companiessuch as Integra Hindustan, Kalindee and Siemens, which are involved inproviding signalling equipment to the Railways stand to gain fromthis. Among other beneficiaries of the rail budget are companies suchas Stone India, Hind Rectifiers and Simplex Castings.IT push
Apart from capital goods suppliers, the Railway Budget offers someopportunities for domestic IT hardware and software companies as well.Proposals ranging from increased mobile ticketing, augmenting ITinfrastructure, fleet tracking, having CTV and LED displays at Railwaystations to having complete call-centre infrastructure by 2008-09gives companies operating in these segments significant opportunity.
For example, while Bartronics might benefit from greater RFIDdeployment, proposals to increase mobile ticketing may benefit CMC.
MIC Electronics being a strong LED and video display manufacturer maybe a beneficiary.
HCL Infosystems with its complete IT infrastructure offering andexisting Government clientele could make inroads into Railways. Alongwith CMC, it could also look to tap into system integration projects.
All these companies are used to working with the relatively smallermargins that domestic deals provide. But it remains to be seen if tier-I IT companies will look at entering this fray, as a means to increasetheir domestic footprint.
Source : Business Line
www.thehindubusinessline.com/2008/02/27/stories/2008022752331700.htm