Titagarh Wagon Ltd (TWL), heavily dependent on supplying goods wagons to Indian Railways so far, is de-risking its business model by demerging its divisions that make railway coaches and heavy earth moving machinery into its subsidiaries.
The demerger would help raise capital separately for its new businesses. It is also expected to attract equity investors who so far have been wary of risking investment on goods wagons.
The coach-making subsidiary would allot 12 equity shares for every 100 TWL shares. “Wagons and all other business segments shall continue with Titagarh Wagons,” TWL said in an exchange filing on Monday.
The demerger decision, industry sources said, was brought about by railways’ precarious financial position due to which its wagon procurement from companies such as TWL turned erratic. A few years back, the railway ministry, then under Mamata Banerjee, had also wanted to build its own wagons, something that spooked companies such as Titagarh and Texmaco.
Last fiscal, Titagarh supplied 2,855 wagons, lower than 2,870 wagons the previous year. Besides wagons and coaches, TWL generates revenues from earth-moving equipment and steel foundry.
But wagons accounted for 90% (`567 crore) of Titagarh’s sales (`644 crore) last fiscal. Earth-moving equipment contributed just `11 crore. Share of foundry varies.
Wagons’ share fell to below 50% during the September quarter though they accounted for around 80% of TWL revenues in the first half of this fiscal.
The railways source different types of coaches like electrical multiple units (EMUs), diesel multiple units (Demus), main line electrical multiple units (Memus) and also metro coaches.
Titagarh has already set up a facility at its existing Uttarpara plant, and is currently making 23 such rakes for Indian Railways to begin with.