Texmaco Rail looks to pare short-term debt to enhance profitability

Saroj Kumar Poddar-led Texmaco Rail and Engineering (TexRail) would be looking to retire some of its high-cost short-term debt through a rights issue in a bid to improve profitability. 

Speaking to Business Standard, Ashish Kumar Gupta, deputy managing director, TexRail, said the company is going to finalise the size and pricing of the rights issue before September-end.

“We have already announced a rights issue, which is going to open very soon and may happen this month itself. The size and pricing of the rights issue would be finalised in the next few days and I think we should be going to the market very soon,” Gupta said.

TexRail has a dominant position in rolling stock offerings for railway operations. While the company has a healthy order book, it has been facing some headwinds due to high-cost debt, affecting profitability. This has pulled down the share price of the company on the bourses, sabotaging an earlier rights issue.

“We would be retiring high-cost debt from the proceeds of this (fresh) rights issue. The total short-term debt is currently around Rs 450 crore while the long-term one would be close to Rs 40 crore. We will be trying to retire a part of the short-term debt through the rights issue. It can help in repaying the loan faster since it will reduce the interest outgo,” he added.

According to Gupta, TexRail had around Rs 100-105 crore of cash-in-hand as on June 2021. Consolidated order book of the company is at approximately Rs 3,400 crore.

Responding to queries about a possible turnaround, Gupta said, “We are working on bringing the interest cost down and the rights issue will help us get there. That would improve the bridge between earnings before interest tax depreciation and amortisation (EBIDTA) and profit before tax (PBT). We are also working on cost reduction programme and have a consultant working with us on a long-term cost-reduction strategy.”

Highlighting the focus areas for the company, he said, “There are a lot of railway tenders coming out and we would be participating in them. Our main focus area would be track laying. We are also interested in metro projects that are coming up.”

Gupta said TexRail would not want to get into private rail operations, but would rather manufacture engines or rolling stock for them.

TexRail would want a pie out of the privatisation of other railway services whenever opportunities arise. “The other thing we will be keen on is services, such as track maintenance, when they open up. It will require policy changes after which the railways can give long-term contracts. We are keen on EPC (engineering, procurement and construction) in the metro rail and high-speed segments, as well as signalling, which is our forte. We seek to grow in electrification, track laying, and signaling, among others. We are also keen to enter the mechanised track maintenance and manufacturing of these machines, and are preparing for them to get a head start over competition,” Gupta said.

The company does not have any near-term plans for capacity expansion but would focus on improving capacity utilisation. “The entire industry is operating at around 20 to 50 per cent capacity. We would not be spending on capacity expansion but on sustainability. We have capital expenditure plans to improve our performance on the environmental front, reducing carbon footprint and energy efficiency. We would also be improving our capabilities for design and development,” Gupta said.