Railway company RITES to expand global footprint

New Delhi: State-run railway engineering and consulting company RITES Ltd proposes to expand its global footprint by targeting export orders for its rolling stock and consultancy business from South East Asia, Africa, West Asia and Latin America. 

The firm is looking to scale up the share of exports in its revenue to 20-25% by FY26, chairman and managing director Rahul Mithal said in an interview.

Having won global tenders for ₹1,200 crore to supply coaches and locos to Bangladesh and Mozambique, RITES is now bidding for tenders for rolling stock supplies, consultancy operations and quality assurance businesses across regions, Mithal said.

A few large projects are expected to land in FY25 helping it scale export operations.

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“We started FY24 with an export order book of less than ₹100 crore as no fresh orders were received for past four years. The Bangladesh and Mozambique order has come at the right time and given us confidence to win more orders even in competitively bid global tenders. So, we have placed our bids in various markets for export orders and are hopeful of bagging more global projects this year,” Mithal said.

“Export orders along with diversification of the quality assurance business where we have secured more non railway orders (55% now), have placed RITES on the right track which the company intends to capitalise in the current financial year,” he added.

RITES standalone revenue down 8% y-o-y

RITES has reported standalone revenue of ₹2,312 crore in FY24, down 8% from ₹2,519 crore in the previous year. The share of export revenue in this is negligible ( ₹100) as the company did not secure fresh orders.

“The revenue from Bangladesh and Mozambique orders will start flowing from third quarter of this fiscal boosting company’s export earnings. We are targeting exports share in our total revenue to be around 20-25% level and this should be achieved by FY26,” Mithal said.

Sets sights on global consultancy projects 

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 neighborhood, including Sri Lanka, Bangladesh and Nepal, as well as in West Asia, Latin America, Europe and the US.

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Mithal said the international consultancy is an important focus area under company’s strategic initiative called Rites Videsh and it is getting scaled up with the addition of newer geographies and wider range of work including train services, metro, highway, bridges, green projects etc.

“We recently got a breakthrough order for third party inspection from Sri Lankan Railways, our first internation business in quality assurance stream, and this should be beginning of our larger participation in the island nation that got impacted in previous years due to financial crisis there,” Mithal said.

Looking for quality assurance business

The Railways’ decision to empanel three more firms for quality assurance and inspection services impacted RITES from the beginning of FY24 as it took away a substantial chunk of high margin projects from it.

Shrinking export orders and a falling quality assurance business were largely responsible for lower FY24 earnings. But with RITES now getting a 55% share in quality assurance from non-Indian Railways clients in FY24, this stream is also picking up. With independent safety assessment (ISA) credentials, RITES is now also looking at its quality assurance business in overseas markets and has already bagged a few projects.

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