Railway engineering and consulting company Rites Ltd is close to signing international contracts to supply locomotives and wagons, even as it explores consulting services abroad, chairman and managing director Rahul Mithal said.
The state-run company has emerged as the lowest-cost bidder for contracts worth Rs1,000 crore to supply locomotives and wagons to Zimbabwe and Mozambique, Mithal said in an interview.
Rites is also exploring consulting opportunities related to projects and rolling stock in India’s neighbouring countries such as Nepal, Bangladesh and Sri Lanka, as well as in Latin American countries, especially Chile, that share a broad-gauge railway system similar to India’s.
The company’s revenue and profit fell in the first quarter as export orders fell and Indian Railways reduced rates on quality assurance and inspection services to a fifth, Mithal said. “Now, Rites will aggressively focus on the export of rolling stock to raise its share in total revenue,” Mithal said.
Rites is hopeful of two orders bearing fruit soon—one from Zimbabwe’s National Railways to supply 3,000hp diesel and electric locomotives and high-sided open wagons, and the other from Mozambique, it has emerged as the L1 (lowest cost) bidder.
“Though it is premature till they fructify into final orders, but yes, these orders are worth over `500 crore each, and we hope that these orders start generating some revenue for us in the current fiscal itself and end the drought of export orders post-execution of pre-covid orders in Sri Lanka and Mozambique over the last two fiscals,” Mithal said.
Rites has also sent delegations to select Latin American countries with exports in mind.
“We have been traditionally targeting Southeast Asian and African countries. There has now been a very aggressive push to target Latin American countries for exports. We are trying to find countries which have maybe similar gauge or similar voltage so that we can look at supplying products suited to their needs quickly,” Mithal said.
Apart from rolling stock exports, Rites also proposes to expand its high-margin international project consultancy operations to expand its share in total consultancy revenues from the present 12% to over 20 %. In this regard, the company is looking for projects both in the neighbourhood, including Sri Lanka, Bangladesh and Nepal, as well as in West Asia, Latin America and even in Europe and the US.
“International consultancy is a very important focus area under our strategic initiative called Rites Videsh. So, all our international consultancy projects are being looked at through this strategic initiative. We are doing a highway project in Guyana and implementing the Mauritius Metro project. We recently got an order in Bangladesh for consultancy for a multimodal station. We provided consultancy for an integrated check post project in Nepal. We are also doing highway and railway projects in Bangladesh. So, across continents, right now, we have about 12 live orders of international consultancy. And we have submitted a large number of expressions of interest and requests for proposal across Southeast Asia, Latin America and Africa across all infrastructure sectors, and these will definitely mature in the coming months,” Mithal said.
The Railways’ decision to empanel three more firms for quality assurance and inspection services impacted Rites in the first quarter. The railway inspection business accounts for 60% of the total quality assurance service revenue of Rites, and this has now fallen to a fifth. Hence, the company is now looking for such business outside the railway fold. It has also secured independent safety assessment (ISA) credentials, making it only the second entity in India and the only public sector undertaking to have this important credential.
“ISA credentials will add prospective clients across various types of inspection, whether they are registered as metro coaches, products or various types of inspections,” Mithal said.
“We recently entered into an MoU (memorandum of understanding) with Norwegian entity DNV having operations in more than 100 countries. So, we are looking at partnering with them to explore international inspection opportunities also, apart from those existing in India,” he added.
Rites’ consolidated operating revenue fell 10% in the June quarter to 544 crore, while total revenue stood at 563 crore, down from a year earlier. Ebitda and net profit amounted to 161 crore and 120 crore, respectively, with margins remaining consistent at 29.6% and 21.3%, respectively. The decrease in revenue was attributed to a decline in exports and revenue from quality assurance.