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The Italian government is likely to acquire at least 20% stake in Titagarh Wagons' fully-owned subsidiary Firema SPA, sources told PTI.

Invitalia, the Italian government's investment promotion agency, will be acquiring 20-30% stake in Firema, said news agency PTI quoting sources.

Titagarh Group that faced financial headwinds during the pandemic was in talks with the Italian government for capital support.

Firema also has a significant role in building India's first aluminum coach for Pune Metro.

According to Titagarh Wagons MD Umesh Chowdhary, as quoted by PTI, it is a major breakthrough that the Italian government will pick up a stake, apart from a PE investor, in Firema.

Stating that the promoters will also infuse fresh capital, he said that more details cannot be disclosed at this point in time due to confidentiality clauses until all approvals are in place.

Italian railway firm Firema which is executing railway projects in Europe, was taken over by the Kolkata-based Titagarh Group in 2015.

Chowdhary said that Titagarh Wagons will retain the majority stake in the subsidiary, which now has a paid up capital of 13 million euros, adding that the company has a 100% ownership in Firema, but it will get diluted after the entry of new investors.

He further stated that the Italian government's investment will open a sea of opportunity for the company, adding that Government backing will help the company secure more orders and the recapitalisation will boost the execution of new contracts.

Firema SPA had reported a loss of around 9 million euros in the last fiscal, including one-off exceptional expenses totalling 4.5 million euros due to operational restructuring.

Chowdhary expects Firema to become EBITDA-positive in the current fiscal, and said that it will take another year to be Net-positive.

Stating that the company was suffering due to legacy orders, he said that presently it has a healthy order book of 500 million euros, which is expected to be executed in the next four-five years.

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