Rail budget derails wagon makers on bourses

In D V Sadananda Gowda's budget speech, the word wagon appeared only twice, first as a metaphor.

"Indian Railways practically carries anything and everything and it never says no to 'a thing' if it fits in the wagons," said the minister while reiterating the inclusive nature of world's fourth largest railroad network.
The word appeared the second time rather vaguely while indicating the minister's willingness to encourage "development of locomotives, coaches and wagon leasing market".

There was no word on annual procurement of the wagons, which is mostly mentioned in budget speeches, giving a direction to the role Railways would play in creating incremental goods carrying capacity in the nation and supporting a whole lot of industries that manufacture them.

The wagon industry wasn't impressed, which got reflected in the drubbing stocks like Titagarh Wagons and Texmaco Rail got on the bourses. The stocks crashed by 5% to 20% after the budget.

"We would have loved the minister to talk on this. But then, the arithmetic wouldn't have worked out. Where is the money to buy?" Titagarh Wagons executive chairman J P Chowdhury told dna.

The Railways, Chowdhury said, probably need to raise resources before it can make investments in procuring wagons; the government not only pays for the wagons that it procures from companies like Titagarh, it also supplies them with free consumables.

The last industry-wide wagon allocation by Railways happened in April after a long gap of almost more than a year and no allocation was made in calendar 2013, driving many of the wagon makers like Texmaco operate at low capacity utilisation or some like Jessop & Co even forced to closure.

Wagon makers like Texmaco are also trying to see ray of hope in Railways's long-term investments in expanding network.

The wagon industry, which has been in doldrums lately, would pick up momentum and regain its health through larger flow of orders with expansion of rail network," Ramesh Maheshwari, executive vice chairman, Texmaco, said.

Uttering on foreign direct investment too wasn't quite well received by the market as it was devoid of specifics.

"Allowing FDI doesn't mean the funds will start flowing in right away. I think we are over-emphasising on it," said Chowdhury.

"I am curious about how the minister intends to rope in private sector participation. Just opening up this sector to FDI excluding operations and wishing for private sector participation may not be enough. I feel Indian Railways will need to review its accounting standards before it can expect private sector to come and invest in rail projects in a big way," said Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance.

In contrast, the budget was a bonanza for small-sized companies that are working on developing technology-driven products that aim to improve passenger convenience or goods carrying efficiency.

Consider a company like Stone India, which has spent money and time developing bio-toilets that ensures zero-discharge with Defence Research and Development Organisation.

The Kolkata-based engineering firm recently tied up with Shenyang of China to make escalators and elevators for Railways. Earlier it preempted opportunity in platform screen doors in metro rail platforms that has now been made mandatory to prevent suicides.

All these products found mention in the budget.

"This budget is super for our businesses. We see close to Rs 700 crore opportunity from bio-toilets and escalators alone." said Amit Mondal, managing director of Stone India.