RAILWAY VIKAS NIGAM (RVNL)

Go-to agency for rail projects

A mini ratna PSU, Railway Vikas Nigam (RVNL), in which the government holds a 78.20 per cent equity stake, was incorporated in 2003 to undertake rail project development, mobilise financial resources and implement rail projects pertaining to strengthening of Golden Quadrilateral-ports connectivity. It executes all types of railway projects, including new lines, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable-stayed bridges, and institutional buildings.

RVNL functions as an executing arm of Indian Railways and has contributed more than 30-35% of railway infrastructure. It generally works on a turnkey basis and undertakes the full cycle of project development. It has also started participating in Metro, highway and other infrastructure sectors through competitive bidding.

As part its original mandate, RVNL has successfully set up five project-specific special purpose vehicles (SPVs) for execution of important rail connectivity projects in PPP (public-private sector participative) mode.

REVENUES BOOM

The company has made rapid strides on the financial front. During the last nine years, its revenues have expanded more than six times from Rs 3,001 crore in fiscal 2005 to Rs 20,282 crore in fiscal 2023, with operating profit shooting up almost nine times from Rs 146 crore to Rs 1,247 crore and the profit at net level spurting over four times from Rs 337 crore to Rs 1,421 crore. Its prospects going ahead are all the more promising. Consider:

• The company has a robust order book of Rs 70,000 crore, of which the Railways order is the largest, while one worth Rs 1,600 crore is from the Maldives. There are also railway enquiries from Botswana, South Africa and Vietnam. The company has already set up offices in Oman, the UAE and Botswana. It has an ambitious order book target of Rs 1,00,000 crore.
• Indian Railways, RVNL’s principal client, has the fourth largest network in the world of 68,442 route kilometres. It runs around 22,000 trains daily, of which 13,500 carry passengers and 8,500 carry around 3.5 million tonnes of freight per day. The Railways’ vision of a National Railway for India – 2030 envisages creating a future-ready railways system, which aims to increase its freight share to 45 per cent. This spells huge growth prospects for RVNL.

HIGH-SPEED PLANS

• RVNL has realised the vast potential for building a highspeed network and has formed High Speed Rail Corporation of India (HSRC) as its subsidiary.
• RVNL has taken the lead for establishing six joint venture SPVs in partnership with various stakeholders for implementation of rail connectivity projects.
• REC Limited, a prominent Maharatna Central Public Sector Enterprise (CPSE) established in 1969 under the Ministry of Power, has recently entered into an MoU with RVNL. This collaboration aims to provide financial support of up to Rs 35,000 crore for a range of infrastructure projects over the next 5 years.

OVERSEAS WORK

• RVNL has signed an MoU with Kyrgyzstan for four projects to develop rail infrastructure over 1,000 km, and a DPR (detailed project report) has been prepared of around Rs 20,000 crore. RVNL has received its first overseas project, the UTF Harbour Line project, which will be used by the MNF (Maldives National Force), comprising marine works buildings, infrastructure and equipment. The project is to be completed in two years at a cost of Rs 1,500 crore.
• The company’s asset-light business model keeps the balance sheet stress under check.
• Its foray into road projects, metro projects and power distribution allows it to tap into vast growth opportunities in other sectors.

In FY 2024, we expect the company to register EPS of Rs 7.9 and EPS of Rs 9.5 for FY 2025. The scrip trades at Rs 182. P/E on FY 2025 EPS works out to 19.2.

PERFORMANCE INDICATORS (Rs. in crore)

AUTOLINE INDUSTRIES

On a smart turnaround path

Pune-headquartered Autoline Industries (AIL), originally floated in 1995 as a partnership firm, has today grown into a medium-sized engineering and auto ancillary company engaged in the manufacture of sheet metal components, sub assemblies and foot control modules, parking brakes, hinges, cab stays and cab tilts, exhaust systems, tubular structures, fabrication, etc, for large OEMs in the automobile industry with a presence in both domestic and international markets. The company has more than 10 state-of-the-art manufacturing facilities, backed by in-house design and engineering services and a commercial toolroom. It caters to almost all global OEMs, supplying over 3,000 products getting assembled in different passenger cars and commercial vehicles. All the manufacturing facilities have been certified as ISO/TS 19649: 2002 by TUV (Rh) Germany.

The company was in bad shape all these years on the financial front. During the last 12 years, sales declined from Rs 748 crore in fiscal 2012 to Rs 650 crore in fiscal 2023, with operating profit sliding from Rs 76 crore to Rs 49 crore and the profit at net level slumping from Rs 39 crore to Rs 11 crore. However, in the current fiscal year, it has staged a noticeable turnaround. In the first half (April to September 2023) of the current fiscal, though its sales dropped 11 per cent to Rs 310.96 crore, its OPM improved 190 basis points to 7.3 per cent and saw the OP rise to Rs 22.85 crore, while PBT stood at Rs 5.90 crore against the earlier loss of Rs 1.53 crore. The marked improvement in operating margins is attributed to increased operational efficiency, improvement in productivity and significant cost saving measures.

However, exceptional items led to a loss of Rs 1.05 crore against a profit of Rs 31.25 crore, after which the profit before tax after EO (extra ordinary) expenses fell 60 per cent to Rs4.85 crore. Finally, the net profit declined 60 per cent to Rs. 4.92 crore.

GREEN SHOOTS

Now, the company is on a turnaround path. The management is confident about the domestic environment and feels the aspiration of OEMs to procure top-tier auto components to cater to the burgeoning demand for sophisticated and distinct vehicles will further propel the growth momentum.

Thanks to the remarkable turnaround in the first two quarters of the current fiscal, prospects for the company going ahead are highly promising. Consider:

• Thanks to rising incomes, growing aspirations and easy availability of bank credit for vehicles, the demand for automobiles is on the increase. This is turn has led to an improved demand for automotive components.

Autoline Industries’ revenue grew by 8 per cent in the Q1 of fiscal 2024 due to increased volumes from the PV segment along a marginal increase in LCV volumes. Demand for all these products is on the increase and the industry expects better growth in volumes going ahead.

TATA BOOST

• Tata Motors, a major client of Autoline, is expanding its operations at Sanand in Gujarat. With a view to catering to this valued client, the company is setting up a greenfield plant at Sanand at an estimated cost of Rs 50 crore. The company has already signed a MoU with the government of Gujarat and the plant is expected to go on stream by March 2024. Autoline is eligible for subsidies as per the state government’s policies. The new plant will have the capacity to produce 2.40 lakh auto components per annum. This plant, with effect from the next year, will enable the company to push up its topline as well as bottomline.
• As the company was short of liquidity, the management raised Rs16.51 crore by way of compulsory convertible debentures allotted to various investors. Additionally, the promoters will invest Rs 22.44 crore by subscribing to 22 lakh warrants at a price of Rs 102.50. The promoters’ putting in additional funds for growth will instill confidence in the public over the company’s future. The funds will be utilized for capacity expansion and operational efficiency improvement at the Pune plant so as to cater to existing and new customers. The expansion will be completed by Q3 fiscal 2025. The fund-raising through debentures and warrants has enabled the company to navigate adversity and capitalize on promising prospects.
• The company has also signed a binding shares purchase last August to divest its investment in Autoline Industrial Parks Ltd. This would result in a substantial influx of funds totaling Rs 95 crore over the next two years. This strategic move not only fortifies the company’s financial position but will also effectively address the requirements for working capital enhancement and debt reduction.

E-BICYCLES

• As the winds have started blowing in favour of e-vehicles, the company has moved with times and has concentrated its R&D efforts on electric vehicles. These R&D efforts have led to the development of innovative solutions. The company has developed its own bicycles. The company has decided to manufacture these innovative bicycles by utilizing its existing capacities with the support of Autoline Design Software Ltd, a wholly-owned subsidiary in design, engineering and development. With this new venture, Autoline E-Mobility Pvt Ltd, a wholly-owned subsidiary of the company has developed eight variants of e-cycles in various sizes with the brand name ‘E-speed’. By now, 4 new models have already been launched.
• The company has also ventured into the railways and locomotive business for around 40 products, including sliding doors, stainless steel end walls, water tanks, flat bogey frames, side wall assemblies, etc., and anticipates receiving orders within the next 3 to 6 months.
• Realising that India is poised to play a prominent role in the electric vehicle segment, the company has decided to diversify its EV product portfolio. This will improve topline and operational efficiency and will also push up the bottomline.

BETTER RETURNS

After passing through a very difficult period, the company’s financials are coming into good shape. The company has reported a return on equity (ROE) of 15.88% and a return on capital employed (ROCE) of 12.07%, and is constantly trying to improve its profitability ratios. Notably, the company has past accumulated losses of over Rs 100 crore and thus is not expected to pay any taxes for the next three years.

In FY 2024, we expect the company to register EPS of Rs 16.8 and EPS of Rs 21.5 for FY 2025. The scrip trades at Rs 437. P/E on FY 2025 EPS works out to 20.3.

PERFORMANCE INDICATORS (Rs. in crore)