Finance minister Nirmala Sitharaman is going to present the Rail Budget along with the Union Budget 2022 today. The two were merged together in 2017 by the Narendra Modi government.
Railways, which has been badly impacted by Covid-19 and the resultant lockdowns, is expected to see increase in budgetary allocation by 15-20% this year, as per reports. Last year, the central government had allocated ₹1.1 lakh crore to the Railways for new development projects to enhance levels of safety and comfort for passengers.
Indian Railways has suffered a massive loss of ₹26,338 crore over the last one year, as several revenue-making operations remained suspended for months. However, situation has slightly improved, thanks to rise in income from passenger traffic and freight earnings, as well as fall in operating costs. The losses were also offset by rise in revenue from the sale of passenger tickets and drop in losses from fare concessions given to passengers. All fare subsidies, except for patients and students, were suspended during the Covid-19 pandemic.
Amid hopes that the government will increase capital outlay for Indian Railways this year, here are few rail stocks which are likely to benefit from improvement in the investment outlook of railways.
Indian Railway Catering and Tourism Corporation (IRCTC)
The ticketing arm of Indian Railways has given a stellar return to investors since its listing in 2019, rising 420% during this period. The stock has risen 182% over the last one year and 77% during the last six months. It has dropped more than 3% in the past one month.
With a market capitalisation of ₹64,976 crore, the midcap company provides ticketing, catering, and tourism services for the Indian Railways. For the quarter ended September 2021, the company reported a net profit of ₹158.6 crore, nearly five times higher as compared to profit of ₹32.6 crore in the year ago period. The total income also surged to ₹405 crore for the second quarter of the current financial year, as against ₹88.6 crore in the same period last year.
BEML
The PSU company, which manufacturers rail coaches, is likely to benefit from modernisation and expansion of railways and metros. The company operating in three verticals — defence and aerospace, mining and construction and rail and metro, reported a 38% YoY fall in consolidated net profit to ₹10.66 crore during the second quarter ended September 30, 2021. The net sales jumped 50.7% to ₹1,000.42 crore in Q2FY22, compared to same period last year.
With a market capitalisation of ₹7,412 crore, BEML shares have gained 92% in one year, while it surged 36% over the past six months. The stock price has climbed 11% in the last one month.
Titagarh Wagons
The railway wagon manufacturer is expected to benefit from the government’s thrust on improving India's railway infrastructure. Based in Titagarh, West Bengal, the company manufactures coaches for the Indian Railways, bailey bridges, and mining equipment. It is the largest private sector manufacturer of railway coaches (EMUs, MEMUs).
The rail stock, with a market cap of ₹1,336.80 crore, has given 96% returns to its shareholders in the last one year. Since the beginning of this year, it has risen 18% and 1% during the past one week.
For September quarter of 2021, the company’s consolidated net profit jumped 91% to ₹5.75 crore on a 8.7% jump in net sales to ₹459.97 crore, compared to the corresponding quarter last year.
Texmaco Rail and Engineering
The engineering and infrastructure company has given 36% returns to its shareholders in the last one year and 16% during six months. It has jumped 28% over the last one month.
The company has reported net profit of ₹6.33 crore in September 2021 up 469% from ₹1.11 crore in the year-ago period. Net sales dropped by 8% to ₹373.74 crore in Q2 FY22, from ₹406.48 crore in September 2020. Last month, the company raised ₹165 crore by the rights issue of about 7.15 crore shares.
Siemens
The company, which makes trains and turbines, has given 36% returns to its shareholders in the last one year. The share of large cap company, with a market capitalisation of ₹79,888 crore, rose 16% over the past six months, while it dropped 6% since the beginning of this year.
Siemens has declared positive results for the last three quarters. Last month, the company's joint venture with the Tata group bagged an order from Pune IT City Metro Rail Limited. TRIL Urban Transport Private Limited, a joint venture between Tata group and Siemens Project Ventures GmbH, a subsidiary of Siemens Financial Services, had secured an order to develop the metro corridor from Hinjewadi to Shivajinagar through a public-private partnership route.