3903

Cautious budget dims outlook for rail stocks

The railway budget provides little hope of business revival
Comment E-mail Print Share
First Published: Tue, Feb 26 2013. 07 04 PM IST
The 17% reduction in expenditure on wagons to `4,132 crore the next year further dims the outlook for wagon manufacturers. Photo: Ramesh Pathania/Mint
The 17% reduction in expenditure on wagons to Rs.4,132 crore the next year further dims the outlook for wagon manufacturers. Photo: Ramesh Pathania/Mint
Updated: Tue, Feb 26 2013. 11 15 PM IST
In his thrust to improve the financial health of Indian Railways, minister Pawan Kumar Bansal has had to compromise on investments. While some areas, such as the emphasis on safety and the dedicated freight corridor that will see higher money spent, the general tightness in government spending is seen in the railway budget as well.
Sure, the overall planned investment has been increased to Rs.63,363 crore, up one-fifth from that for the current fiscal year. But considering that this financial year’s planned expenditure was pared by more than 13% in the first place, one cannot be sure if the railways will find resources to spend the entire budgeted amount for 2013-14.
The inadequacy of resources finds its way into many areas that generate business for companies such as Titagarh Wagons Ltd, Texmaco Rail and Engineering Ltd and Kalindee Rail Nirman (Engineers) Ltd. The target to add 700km of new lines in the current fiscal year has been scaled down to 470km. In the next year, there is a marginal increase to 500km.
photo
Similarly, the gauge conversion target of 800km for this year has been reduced by 28% to 575km. For the next fiscal year, the target has been further cut to 450km. Again, allocation for rolling stock investment (amount used to procure wagons, locomotives, carriages and others) has been pegged at Rs.17,934 crore, lower than the Rs.18,068 crore the railways has planned to spend in the current fiscal year.
What further dims the outlook for wagon manufacturers is the 17% reduction in expenditure on wagons to Rs.4,132 crore the next year.
A Rs.50 crore increase in expenditure for signalling and telecommunications bodes well for providers of such equipment. But considering the trend of downward revisions—investment in overall rolling stock for the current fiscal year has been reduced from a budget estimate of Rs.18,493 crore to Rs.18,068 crore—the hike in expenditure offers little hope for signalling companies.
Overall, the decision to go slow on investments in new wagons and construction of new lines further clouds the outlook for companies that depend on the railways for business. As it is, ordering activity from the railways has been impacted owing to litigation. With high competition impacting margins, stocks of companies that depend on the railways for business have been underperforming the broader markets for some time now. With the railway budget providing little hope of business revival, there is no reason for the trend to reverse any time soon.
Comment E-mail Print Share
First Published: Tue, Feb 26 2013. 07 04 PM IST
blog comments powered by Disqus
  • Wed, Apr 23 2014. 05 42 PM
  • Wed, Apr 16 2014. 06 11 PM
Subscribe |  Contact Us  |  mint Code  |  Privacy policy  |  Terms of Use  |  Advertising  |  Mint Apps  |  About HT Media  |  Jobs
Contact Us
Copyright © 2014 HT Media All Rights Reserved