TITAGARH RAIL SYSTEMS LIMITED analyst Q&A

Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Balasubramanian from Arihant Capital.

Good evening, sir. Thank you so much for the opportunities. Sir, my first question regarding signaling systems, who are our global JV partner? And what are the timelines for products and approval? And what kind of revenue visibility we can expect over 3 to 5 years? Those are my first question, sir.

Thank you. So this is a new business unit. It will definitely take some time. We have started participating in some tenders. We have participated in a particular tender, the results of which is still awaited. As regard the joint venture partners is concerned, we have different products that we are doing in this segment. We are in partnership or in dialogue in some cases with different partners. As was announced, we are working with a company called MERMEC in Italy for some of the products. There are other companies in different parts of the world for different products that we are working on. We would not announce any of these on a premature basis. As and when we are able to succeed in a particular venture, we will definitely come back and announce to the market, both the exact specific opportunity, which materializes, along with the names and details of the strategic partner in that case. As a matter of policy, we would like to be conservative in our approach, not to announce something before it is completely finalized.

Okay, sir. Sir, on the traction motor side, I think our revenue is around INR 300 crores. I think the opportunity size is around INR 2,000 crores as per the presentation. Like what are the steps to tap the opportunity?

I missed your last part of the question, sir.

On the traction motor side, I think our top line is around INR 300 crores, and the opportunity size is mentioned around INR 2,000 crores kind of opportunity size. And like how we are going to tap that opportunity? I think we are doing around 100 motors per month.

Yes. I don't know where you get the revenue number from, but I will just give you about the opportunity. The opportunity indeed is quite large. As far as how we are tapping the opportunity, as I just mentioned, we have already got into a run rate of about 125 traction motors a month. So we are confident of from an average of 50 motors per month last year, we will be able to increase it to between 125 to 150 motors a month this year. But that is only one part of the business segment of the propulsion and electrical. Apart from that, once our EMU and MEMU propulsion is approved by the railways, that in itself, we have an order book of close to INR 400 crores on that. And there are several tenders in the pipeline for that. So we believe that this business, we have been working on this for a while now, and we are fully in state of readiness to be able to take off on this business. And within the next maybe 2 years or so, we will be fully into this business, and this will be one of the main lines of business for us.

Okay, sir. Sir, on that wheelsets planned earlier, a year back, it's estimated around INR 1,300 crores, INR 1,400 crores. As far as RK Forgings, they mentioned around INR 2,000 crore kind of CAPEX is estimated. But the CAPEX, sir, keeps increasing. B ecause of the delays in the plant, and how do you see cost escalation side?

No, there is no CAPEX delay. Earlier estimation that was given was a very basic estimate. Once the project report was finalized, including 2 phases of the project, the cost is what has been announced by RKFL. The project is going on pretty much on track and pretty much within the budget that was approved in the project report, based on which the project has been taken up.

Okay. Sir, on the wheelsets side, like still we are facing issues. So when we can expect normalcy?

Sir, actually the delay in wagon production is because of the wheelsets issues. And when we can expect normalcy overall in the industry?

I already mentioned that in my opening comments, sir, that we understand from the month of June, the production of wheelsets will become normalized.

Okay sir. Thank you.

Thank you. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.

Hi. Good afternoon, sir, and thanks for taking my question. So my first question is on the wagon ordering side. I mean you mentioned that we expect a tender from Indian Railways, maybe sometimes towards the end of this year. But wanted to get your views on private sector wagon ordering. How has it been? And which are the sectors which are driving private sector wagon order?

Yes, hi, Parvez. So the market is aware that there was a moratorium that was put on the wagon investment scheme, which has actually dampened the private sector offtake over the last few quarters. This moratorium, we believe, should not last for long, because there is a lot of appetite from the private sector to buy wagons. And there have been continuous representations. And I also believe that it is a win-win situation that the wagon is invested into by the private sector. So as of now, the wagon procurement that was happening was primarily on SFTO scheme, which is Special Freight Train Operat or Scheme, and certain specialized wagons. But the bulk of the wagon demand from the private sector will really come once the wagon investment scheme is reopened. So we are waiting and seeing if and when the scheme is reopened, which we believe will be giving a large flip to the private sector in wagon investment. Having said that, we have always maintained as a company that whatever the situation may be, 80% of the wagons are likely to be procured by the Indian Railways. And that's the reason why, as a strategy, we always did not want to put our eggs in a basket, w hich is not sustainable. And we always tried to maintain our order book ratio and our execution ratio in a manner that quarter- to-quarter apart, we should always have the larger chunk of the dependents and the focus on the Indian Railway wagon offtake. As a result of that, today, we are in a position where we have at least a good order visibility and not dependent only on the private sector. Having said that, private sector is definitely likely to come back, and we are waiting for the wagon investment scheme ban or the moratorium to be reconsidered by the railways, hopefully, very soon.

Sure. So as far as Surat Metro is concerned, these are extension of the 2 projects, which is Ahmedabad and Surat actually are extension of Gujarat Metro, 2 projects together, side by side. And when I say that the Ahmedabad Metro will start in Q2 of this fi nancial year, it is going to be followed immediately thereafter by the Surat Metro. So the trains are going to be supplied in tandem of each other. So within this financial year, both these projects will attain their peak production and supply. As far as the Propulsion business is concerned, to give you a very high-level order of magnitude potential and I'm talking about propulsion for sales. That is not propulsion for our own consumption. We believe that we can easily look at doing approximately 2,000 traction motors a year, which will give us a revenue of about INR 300 crores to INR 400 crores. And as far as the EMU/MEMU and other propulsion systems for the railway is concerned, this should be another about INR 500 crores, INR 700 crores to INR 1,000 crores. Of course, it will take a couple of years, 2 to 3 years, to mature. But outside Propulsion business has a large potential, and our capacity that we are building, the capability that we are building is to be able to achieve our overall business of close to INR 1,500 crores only on the sales of propulsion.

That's great sir. Thanks and all the best for future.

Thank you, Parvez.

Thank you. The next question is from the line of Koushik Mohan from Ashika Group. Please go ahead.

Sir, I just wanted to understand one single thing like on the time line, what will be our capacities and how many units side we are going to come for wheelset? And when the revenue will start reflecting in our books?

Sure. As far as the wheelset is concerned, the contractual delivery is supposed to start from June 2026, and we are very much well in track to be able to achieve that. I think more details have also been given by the other joint venture partner in their ca ll about the wheel plant, and it is exactly the same in terms of the revenue ramp-up that has been already shared by them.

And second thing I just wanted to understand, what will be our time lines to deliver one wagon, one metro car? How much time line do we take it to get it from 0 to fully manufactured in our warehouse? Exactly how much time do we...

Sir, your voice was breaking up. Can you repeat your question? Your voice broke up.

Yes, sir. Sir, I just wanted to understand, how long will we take to manufacture one car, one metro car?

Yes, from beginning to end, full from the start to wire harnessing and entire...

So it depends upon the different type of cars. There are different configurations that are there, and each one of them have a different cycle. So if I can just explain to you, probably it will be easier. So after designing is done, then a prototype stage is done, then there is controlled series production, and then there is the series production. Each one of them have a separate cycle time, which are quite different from each other, because there is a learning curve involved. So I will probably just speak about once the maturity level is reached, then the total production time, when you start cutting the sheets to the time you are able to roll out, the car is considered to be around 60 to 90 days.

60 to 90 days. Okay. Sir. And in this year, how many cars that are we planning to sell? Any guidance do we have? Is there any specific number?

We do not give a specific number as a policy, but I have just mentioned to you that within this year, we are looking at ramping up our production to be able to achieve a run rate of between 20 to 24 cars or 25 cars a month. We should be able to do that by end of the financial year. And by that time, it is going to be a ramp-up on a monthly basis.

Got it. Sir, 20 to 25, we are talking about selling? Or is it only with the manufacturing?

It's the same. T his is a made-to -order product. It's not a made -to-stock product. So we only produce when we have the orders.

Got it, sir. Got it. And any new development in Bangalore Metro, sir? Are we having any new developments in Bangalore Metro?

New developments as in?

Sir, because recently, there was one announcement by Bangalore Metro telling on their Yellow line that has been delayed by 3 months. So I just wanted to understand, is it affecting us? Or like what was this announcement came from Bangalore Metro?

I have not read the announcement, so I cannot comment upon that. But as far as we are concerned, our production is going on. There were some hiccups in the beginning , because as we have already informed, this is a contract where we are doing only the manufacturing. The material comes in as a free supply from CRRC. And there were some challenges to get the materials on time from CRRC. Now things have gotten streamlined, and now the production is happening as we are expecting them to happen.

The next question is from the line of Amay Sharda from Purnartha Investment Advisors. Please go ahead.

Thanks for the opportunity. Sir, I just had 2 questions. One was regarding the Passenger segment. I think the margins in this quarter have been low as compared to previous quarter. Any reason for that?

I think the margins have been better, sir, in this quarter, if I am correct. We have an EBITDA margin of about 10% in this quarter. So in fact, it's a positive trend. From 9.44%, it has gone up to 10.4%.

So speaking specifically for Passenger segment, I think they have been reduced from 9% to 3% or 4%.

I do not know which slide are you referring to. If you refer to Slide 15, it will be clear.

Okay. I will do that, sir. Second was regarding the Titagarh Firema audit qualification that was there in the results. Can you explain that? Like what can be the maximum impact we can expect for that?

So as far as Titagarh Firema is concerned, first, I would like to clarify whatever has been mentioned in the notes to our accounts, it is a situation which is still developing. We still do not have clarity as to which way the situation is going to develop. But we are watching the situation with great care and caution. Whatever was the investment made, a substantial part of it was already earlier provided for in our books. And the balance, whatever is the potential noncash loss that is possible, has been quantified in our annual accounts.

Got it. Just to confirm the maximum impairment, if at all, we can expect will be to the tune of book value of the investment in our books, right? Nothing more than that?

That's right.

Okay, sure. Thank you so much, sir.

Thank you . The next question is from the line of Sandeep Mukherjee from SKP Securities. Please go ahead.

Thank you for taking my question. Sir, what could be our shipbuilding revenue for FY '25?

As you can make out from the investor presentation, we do not disclose this as a separate revenue segment, sir.

Okay, sir. So my next question is in the opportunity pipeline, you have mentioned that propulsion system has an opportunity pipeline of INR 2,000 crores. So is this including traction motor? So can we understand it like you will be delivering it in a kit basis, which includes traction motor, TCMS and traction converter? Or sir, traction motor is separate from this?

They are both unique to each other. There is the traction motors also that are separate. And then if we go into the details of this, it will be becoming too technical in nature for this kind of a call. But the configuration of propulsion systems are made i nto different segments, and this is a combination. So I would rather stay with the financial outlook of this rather than getting into the technical nitty-gritties of it. And it is a combination of all the items that you mentioned, which is propulsion, traction motor, TCMS, et cetera.

Okay, sir. And my next question is like you have mentioned in the opportunity pipeline that metro coaches contract is opportunity pipeline of INR 15,800 crores, and Vande Bharat coaches is INR 72,000 crores. So this is the opportunity pipeline for the private sector? Or is that something that ICF is also included in it, ICF also produces Vande Bharat and metro coaches, if I'm not wrong? So does this opportunity pipeline include the government part also?

Opportunity is, in general, we do not still know in case the railway decides to get some of these manufactured in government sector. But normally, we are expecting that this is the kind of business. At least as far as the metro is concerned, it only comes to the private sector, and we expect this is the business that should come to the private sector. But then, of course, government policy is something that we do not have the visibility and the control to comment upon.

Understood sir. Thank you very much.

Thank you . The next question is from the line of Rajesh Bhandari from Nakoda Engineers. Please go ahead.

Hello, good afternoon, sir. Sir, our main production items are wagons, propulsion system, traction, metro rails, Vande Bharat and wheels. Sir, in financial year, '26, '27 and '28, what kind of turnover we can expect, sir? Total.

We cannot give any forward-looking guidance in terms of turnover. What we shared and what we can share with you is what is the company's capacity for the different segments.

Yes. From Capacity point of view. Okay, right from capacity point of view.

So as far as the segments are concerned, the Freight Business segment, we have a capacity of doing 12,000 wagons a year, which if we look at just extrapolating the sales number can give us a potential revenue of around INR 4,000 crores, INR 4,500 crores. As far as the Passenger segment is concerned, the 3 years are going to completely give a different story as we are in the process of ramping up. You can see it in the Investor Presentation how we are ramping up our production capacity. So let me speak about the Coach production capacity at peak. Coach, I mean Vande Bharat and Metro, on an average, gives us around INR 10 crores per coach of revenue. So that is the kind of capacity that we are creating in terms of the coach production. And the propulsion, I have already spoken about. So all the 3 segments that we have, which is the Wagon segment, propulsion and the Coach segment, all 3 of them are being scaled up to be one of, if not the largest capacities in the country. And of course, depending upon a host of other factors, that is the overall market demand, the buoyancy of the country's growth, et cetera, we should be in a leadership position for all of them. As far as the wheels is concerned, again, we have already mentioned, it's a joint venture between ourselves and Ramakrishna Forgings. And the overall capacity that has been created there is for about 220,000 wheels per year, out of which, 80,000 wheels is on a guaranteed offtake basis by the Indian Railways. So that, on a ballpark number, each wheel sells for about INR 1 lakh or some lakh plus/minus 10%. So that's the kind of capacity that we are creating for the wheel venture. I hope that answers your question.

Yes. Sir, this 20,000 order for wheels, that is only the Titagarh part or with RK Forgings, INR 20,000 crores.

No, the order is about INR 14,000 crores, and that is for the company. That is not Titagarh's part. In our investor presentation, we have mentioned about our share of the joint venture. As you can see it in one of the pages of the order book where our shar e of joint venture is mentioned. This is on page...

Sir, sorry to interrupt you, but we request you to rejoin the queue for follow up question.

Only last question.

Sir, you can join back the queue as there are other participants waiting for their turn. Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.

Hello. Good evening, sir. Thank you for taking my question. So a lot of my questions have been answered, but I got dropped in the call in the between, so I had to rejoin the queue. So just wanted to know, from an order book perspective, I think we have around INR 11,000 crores for our company itself. And I think ar ound INR 13,000 crores in the JV. So just wanted to know the execution time line for those, sir?

So each of the order has a separate execution, and I will speak about our company's orders. The freight wagon, the FRS segment orders primarily have about approximately a 1-year execution, whereas the Passenger segment has a longer execution, particularly on the Vande Bharat. As far as the JV is concerned, both the service as well as the wheel JV both have a longer -term execution. So the execution of these contracts they cannot be clubbed up in one basket. They're all very different in terms of their time lines.

Fair enough, Sir. And just wanted to know, I think the railway, I think a new order, which should come in some time. So any kind of conversation that we're hearing when the new tender will come, obviously, it's all speculation, but any rough time line that you all are anticipating or preparing we foresee something coming up soon or maybe first half, second half? Anything you could just comment on, Sir?

See as you're very rightly yourself commented that commenting anything will be speculative and we would not like to indulge in that. But the railways have set up their target of achieving a 3 billion tonne of growth on one side. On the other side, the Gati Shakti program of the Honorable Prime Minister very clearly defined that the logistics cost of India has to be brought down as a percentage of the GDP in order , now we are already the 4th largest economy, which is a great development for us as Indians. And in order to now jump and get to the third largest economy, which I believe is just an arm length away, we will have to improve upon our cost efficiency, and one of the most lowest hanging fruit and essential cost efficiency measures that can be adopted and targeted is the logistics cost, for which enhance railway movement of goods and commodities is must. So having said that, we cannot speak about discussions or speculative, but it is our estimate and our belief that the growth in the Railway segment or the Railway Cargo segment, should also continue. And being a market leader, being one of the most front runners and being prepared for this enhanced growth, we should be in a good pole position to be able to be a part of this growth.

Fair enough. Yes. No, I thought, Sir was saying something. And just like on the something different part maybe...

Sorry to interrupt you, but we request you to rejoin the queue for follow-up question. The next question is from the line of Raj Patel from RK Securities. Please go ahead.

So considering the production challenge and the segmental revenue fluctuation observed in FY '25, how does the management view the outlook for quarter 1 FY '26, especially should we anticipate a meaningful improvement in execution compared with quarter 1 FY '25, particularly in relation to FRS and Metro deliveries?

Thank you, sir. I have already mentioned that the wheelset problem that was there that was playing in the industry continues in the first part of Q1 FY '26 as well. The production of wheelset started from today, as a matter of fact, in Rail wheel factory as we are informed in the line that was shut. So, we expect that from the month of June, the production should pick up, and therefore, normalcy, if I can call it normalcy, should attain from this month onwards. There has been a shortage of wheelset in the earlier parts of the quarter as is very well known and is in public domain. The metro production is picking up, and it is continuously going to pick up, and we will achieve the targeted production, as I mentioned, by the end of this financial year.

Okay. And my next question was, we understood that a recent tender was floated for the Nagpur Metro project. So has Titagarh participated in this bid? And if so, could you please provide us insight on the scope of the project and the competitive landscape?

Number one, Titagarh is participating in every single metro project that comes up in the country. So, there would be no metro project where we would not be interested and we will not be participating. Secondly, the Nagpur project is still on the tender phase. So, it is not yet finalized or the tender has not been submitted as of yet.

Okay. That was all from my side.

The next question is from the line of Ravi Gupta from RT Investment. Please go ahead.

My first question is, could you provide an update on the timeline for achieving the targeted run rate of 1,200 wagons per month? And based on current production trends and operational readiness, is there any revised guidance or internal milestone the company is working towards?

As far as the company is concerned, we have already touched on a number of occasions, 1,000 wagons per month. The overall wagon capacity is calibrated also on the overall business opportunity available. As far as the company is concerned, it is also ready to ramp up and get to 1,200 wagons per month, but we shall be only doing that once we see sustainable business demand in terms of the business outlook, and that would also happen once the new tender of t he railways is finalized. But I can confirm that particularly with the expansion of the foundry that we are going to bring on stream within this financial year, we are, as a company, ready to ramp up our production should the market support us in terms of adequacy of volumes to produce 1,200 wagons a month.

Understood, sir. Sir, my next question is, what is the management 's outlook on revenue growth and EBITDA margin performance for the upcoming quarter in FY '26 as a whole? And are there any updated targets or internal benchmarks that can be shared?

Unfortunately, internal targets cannot be shared. Whatever could have been shared has already been shared in our investor presentation. So, I apologize, we'll not been able to share any further numbers apart from that.

Thank you. The next follow -up question is from the line of Rajesh Bhandari from Nakoda Engineers. Please go ahead.

Thank you sir for giving the opportunity. I just wanted to know how our projected turnover like for wagons you said, INR 4,500 crores per year, 12,000 wagons. For Metro and for Vande Bharat, what is our kind of capacity total?

As I have already mentioned that in our first phase , it is there in the investor presentation also. In the first phase, which we are expecting, since you were asking from a timeline of 2027-28, so we are targeting to achieve a target of 800 to 850 cars per annum, and about 200 to 250 traction motors per month. So about 3,000 traction motors per month.

Sir, like you said, 850 cars, INR 10 crores per car means INR 8,500?

Your maths is better than mine. I need a calculator.

Yes, yes, yes. This was my main question. Right, sir.

Thank you, sir.

Thank you, sir.

Thank you. Ladies and gentlemen, in the interest of time, we'll take this as a last question. I now hand the conference over to the management for closing comments.

Thank you very much. Thank you, everybody, for joining the call and wishing us with very interesting and very kind of thought -provoking questions. But to sum up, I would say that this year, FY '26, is going to be a very critical year for the company. It is going to be a transformative year. I would say FY '26 and then FY '27 are 2 very, very critical transformative years for the company, because historically, as also was the name of the company was a wagon company. Wagon is a stable commoditized business. The Passenger Rail segment that we have is a big upgrade on technological competence, is a big upgrade on value addition that we are doing, which is very reflective of the fact that one wagon, which weighs approximately or which volumes approximately the same as the passenger coach sells at between INR 35 lakh to INR 40 lakh, whereas one passenger coach of the same volume sells at INR 10 crores. So that is the kind of technological or the difference in intricacies and complexities that exist. And for Titagarh, this year, it's going to be year where we will transform the passenger rail system into the next level, and FY '27 is going to be the year where the Vande Bharat and the Metro simultaneously will start production at full capacity. So, these 2 years are going to be transformational for the year. At the same time, we are very bullish on the shipbuilding and maritime systems, which we are relaunching. We believe that in the years to come, this is something that is going to be a very important part of the group's strategy. And of course, not having taken or not taking away the importance that the Wagon business continues to have for us, which is our bread and butter business. We believe these 2 new businesses, along with the safety and signaling systems, which is going to be primarily on the business development stage over the next 1 or 2 years. I don't expect that to get reflected into our P&L, but more into our order book, is going to cast the way for the years to come. The company is fully prepared for all these segments and is very excited. And the government of India has continued to give a big focus on infrastructure, particularly on mobility and urban mobility. We have seen a number of announcements of projects, whether it is for metro, whether it is for local trains like Mumbai Local or Vande Bharat, et cetera. And we are very excited and very honored and very privileged to be in this industry in this time of growth of the country. So, thank you very much for the support from everybody, and we look forward to reporting substantive progress particularly the PRS during this financial year. Thank you very much, and have a great year ahead.

Thank you.

Thank you. On behalf of Titagarh Rail Systems Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.