RITES LTD

Pole player in engineering services

Rites (Rail India Technical and Economic Services) is a Central government-owned ‘navratna’ which operates under the Ministry of Railways. The central PSU is engaged in providing consultancy engineering and project-delivery services in the field, including railways, highways, metros, tunnels, bridges, urban development buildings, airports, ports, ropeways, inland waterways, multi-modal logistic parks and green mobility.

The company was established in 1974 to provide consultancy services to the Indian Railways, including feasibility studies, project planning and infrastructure development. Over the years, its scope has expanded to cover other transport sectors and overseas markets. The company has undertaken more than 5,000 projects in India as well as in over 55 countries across Asia, Africa and Latin America. It has also been involved in the planning and design of high speed rail networks, dedicated freight corridors and urban metro systems.

The company is also engaged in engineering design activities, which include engineering consultancy, feasibility studies, design and planning, environmental assessment, and project management services across multiple sectors. It prepares detailed project reports, environmental and social impact assessments, and undertakes geotechnical investigations and surveys.

Rites is engaged in the export of rolling stock such as locomotives, coaches, wagons and other railway equipment. It operates a fleet of over 90 locomotives provided to non-railway clients, including ports, cement plants, coal plants, power plants, container depots and project sites. The company is also engaged in operations and maintenance services of rail assets at more than 30 sites across India.

Rites has made remarkable progress on the financial front. During the last 12 years, its sales turnover has more than doubled from Rs 1,096 crore in fiscal 2015 to Rs 2,218 crore in fiscal 2025, with operating profit almost doubling from Rs 280 crore to Rs 553 crore and net profit more than doubling from Rs 261 crore to Rs 571 crore. In fact, prospects for the company going ahead are all the more promising. Consider:

ORDERS GALORE

The growth prospects for Rites are immense as the government continues to focus on infrastructure development. This is well-reflected in its robust order book of around Rs 9,090 crore, which is over four times the revenue for fiscal year 2025 and provides revenue visibility for over four years. The government and PSUs account for roughly 70% of the outstanding orders, the balance being contributed by private companies.

What is more, the company continues to get a decent inflow of orders. After securing a turnkey order for signalling works from the Ministry of Railways amounting to Rs 67.25 crore and also winning an order for extension of a general rail project, the company has now received a work order from Damodar Valley Corporation (DVC) for AMC of railway siding tracks, and O&M of S&I and operation of 25 KV OHE ISO isolators and associated systems at DVC’s Meija Thermal Power Station.

The cost of the order is Rs 36.22 crore and the company will invest Rs 180 crore in its 51% subsidiary REMCL, which has received the mandate to develop a 1 GW solar power plant on land owned by Indian Railways. REMCL has planned to develop 400 MW of the solar plant while the rest would be on the developer model. These projects are likely to earn 15.5% in terms of ROE for REMCL.

EXPORT ROLE

Rites has a long history of business relationships and collaboration with several Central and state government ministries, departments, corporations, authorities and public sector undertakings. As a result, the company is frequently allocated projects on a nomination/single tender basis. Rites is one of the agencies of Indian Railways for exporting rolling stock from India, customized for specific client requirements, and components as manufactured by Indian Railways (except exports to Malaysia, Indonesia and Thailand).

Indian Railways has prepared a National Rail Plan for India 2030 to create a future-ready railway system to bring down the logistics costs for industry, which is at the core of the ‘Make in India’ policy.

Viewed in all these contexts, the company has remarkable growth prospects going ahead. The share price is placed around Rs 260 and, once the current bearish situation is over, should swiftly cross the Rs 300 mark.

PERFORMANCE INDICATORS (Rs. in crore)

STL NETWORKS

Present gloomy, future prospects bright

STL Networks, operating under the Invenia brand, is a digital infrastructure and IT services provider catering to telcos, government, defence and enterprises across India and the UK. Born after the demerger of the global services business of Sterling Technologies Ltd in March 2025, and styled STL Network, it specialises in services like fibre centres, cyber security and managed services for enterprises, telcos and governments. The company is headquartered in Pune and has another office in Gurugram. It is engaged in businesses like designing, building and management of digital infrastructure and IT services.

STL’s performance on the financial front is a mixed one. For its first year ended March 2025, the company earned an operating profit of Rs 74 crore on a sales turnover of Rs 1,180 crore. The profit at net level works out at a loss of Rs 32 crore. In Q2FY2026, the company’s revenues have dropped around 36 per cent over the same quarter last year to Rs 231.94 crore. And it has recorded a net loss of Rs 19.29 crore as compared to a profit of Rs 1.78 crore in the same quarter last year. EBITDA during the quarter fell to Rs 7.59 crore. These figures indicate a substantial decline in profitability in Q2FY2026. Despite this, prospects for the company going ahead are quite promising. Consider:

FUTURE BRIGHT

Though STL Network plunged into the red with a loss during Q2 of fiscal 2026, some analysts term it a temporary affair and highlight a long-term position trend with expected revenue CAGR and improving profit margins driven by growth in optical fibre (OFC) volumes and a shift in the services business strategy.

The company is an offshoot of Sterling Technologies Ltd (STL), a global company that provides advanced optical and digital network solutions. The company offers a range of products and services for building digital infrastructure, including fibre connectivity, data centre solutions, 5G network solutions, and cyber security services for telecom operators, cloud providers and large enterprises.

The parent company is a multinational entity. It has manufacturing facilities in North America, Europe and Asia and its solutions are delivered in over 100 countries. STL has demerged its services business and styled it STL Network Ltd, which is listed on both BSE and NSE. This exercise has been done to enable focused growth in optical networking and digital infrastructure. The services business will now operate under the brand name ‘Inventa’ through the newly formed STL Network Ltd. According to the STL management, the decision to separate the services business aligns with STL’s long-term strategy of forming highly focused and agile organisations. STL Network will continue to expand its expertise in building large-scale digital ecosystems, particularly in India and the UK. Going ahead, STL Network will strengthen its digital infrastructure and services portfolio catering to enterprises, telecom operators, cloud service providers and government projects. The Rs 2,600-crore Bharat Net project in Jammu and Kashmir will now be part of STL Network, reinforcing its role in large-scale digital transformation initiatives.

PLUM CONTRACT

The company has won a Rs 359 crore data centre infrastructure contract from Power Grid Teleservices Ltd – a wholly owned subsidiary of PGICIL. The order involves designing, building and maintaining a tier I & II data centre at Manesar, along with a disaster recovery data centre and scalable IaaS solutions. The deal significantly enhances STL Network’s digital infrastructure portfolio and signals strong demand for cloud and disaster recovery services. The acquisition of such a prestigious contract at the outset of its career will certainly enhance the stature of the new company.

The company has planned to raise Rs 300 crore through an issue of non-convertible debentures in one or more tranches through private placement. This fundraising could provide it with additional capital for various corporate purposes.

A major activity of the company is data centre solutions. India’s data centre prospects are extremely positive, driven by significant investment, a surge in demand from AI and 5G and the government initiatives. Promoting digital sovereignty and data localisation, the company is projected to grow from around 1.6 GW in 2024 to potentially 9 GW by 2032, supported by an estimated US$ 20-25 billion in new investments by 2030. Prime markets for its data centre business are Mumbai, Chennai and emerging hubs like Hyderabad and Pune.

Key growth drivers for data centre are (a) Artificial Intelligence (AI) (b) 5G rollout (c) Digital sovereignty and localization and (d) Cloud computing. The market and investment outlook is robust. The sector is expected to attract substantial investment with estimates of US$ 20-25 billion in new capital by 2030.

STL Network is at a nascent stage and will take some time to enter a speedy growth path. The stock price is hovering between Rs 22 and Rs 24. But the long-term prospects are robust as the future outlook for the company is buoyant. Investors who have a lot of patience and who are ready to wait for 5 to 7 years can certainly add this stock in their portfolio.

PERFORMANCE INDICATORS (Rs. in crore)