Jupiter Wagons Ltd, one of India’s biggest railway freight car manufacturers, has concluded a deal to sell a 26% stake to a Slovakian rolling stock company for 100 crore in a bid to expand into Europe and start production of passenger coaches.

The deal envisages a further infusion of at least 300 crore in three years on mutual consent, turning Jupiter Wagons—currently a family-run private company—into a 50:50 joint venture with Tatravagonka A.s. of Slovakia.

The Slovakian firm is one of the biggest manufacturers of railway freight and passenger cars in Europe. It intends to use Jupiter’s factory in West Bengal to produce bogies—or the structure underneath freight cars to which axles and wheels are attached—for the Russian market.

For Jupiter, this alone will create an order book of around $2.5 million a year, or around 160 crore at current exchange rates, with opportunities to scale up production.

Consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd advised Jupiter on the deal.

The Slovakian investment of 100 crore is to be split equally between the Indian rolling stock company and Jupiter Alloys and Steel India Ltd—another private firm owned by the Kolkata-based Lohia family. This firm produces castings and railway track components.

The money raised from the share sale will be used to scale up Jupiter’s manufacturing facility at Bandel, 55km from Kolkata. A 24,000-tonne foundry is to be set up to cater to Tatravagonka. It will be ready in about a year. Over two years, Jupiter is looking to spend 150-200 crore to add capacity to its Bandel facility.

Following this transaction, the two companies—Jupiter Wagons and Jupiter Alloys and Steel—are to be merged, said Vivek Lohia, director, Jupiter Group. “Tatravagonka insisted that in time it should have a greater control in the merged entity," Lohia said, adding, “so we agreed to consider selling 50% stake to them in three years".

Tatravagonka couldn’t immediately be contacted for comments. A key official at Deloitte confirmed that the deal had been concluded. This person asked not to be identified.

The Jupiter Group and Tatravagonka are also about to conclude another agreement to launch a 50:50 joint venture to produce railway brake systems in India. Its manufacturing facility is to be set up at an investment of 100-150 crore and will produce brake systems for high-speed trains and freight trains, according to Lohia.

The Tatravagonka partnership will also give Jupiter access to technologies to produce railway passenger cars in India and increase axle load of freight cars from 22 tonnes to 25 tonnes, he added.

Jupiter claims to have the capacity to produce up to 3,000 wagons a year, but hasn’t ever produced more than 2,400 because it didn’t have orders for more. Most Indian wagon manufacturers are of the view that due to intense competition, margins have thinned to the point of threatening viability.

Less than a fortnight ago, Titagarh Wagons Ltd, another leading rolling stock firm, took control of Italian passenger car manufacturer Firema Transporti S.p.A in a bid to diversify from freight car production. The deal gave Titagarh access to technology to start production of high speed trains and metro coaches in India, as also a robust order book of €220 million in Europe.

Lohia is of the view that margins from wagon manufacturing in India are set to improve in the near term, but Jupiter still needs to expand into more lucrative markets such as Europe for long-term sustainability.

Between the two key companies, the Jupiter group clocked around 450 crore in revenue in the last fiscal, net of sales between themselves, claimed Lohia. Being privately held, the group doesn’t give out financial details.

Close