Shipbuilding, signalling next growth engines: Titagarh Rail Systems

FM Sitharaman - in Union Budget speech - unveiled a slew of measures to open Indian maritime economy, including ₹25,000-crore maritime development fund, tax breaks, and new shipbuilding subsidy policy

One of India’s largest railway companies, Titagarh Rail Systems (known as Titagarh Wagons till 2023), will “not look to be a fringe player” in two new segments — shipbuilding and railway signalling and safety — where it plans to chart a growth path, said deputy managing director (Deputy MD) Prithish Chowdhary.

 

“We do not believe in the approach to try our hand everywhere, hoping that we’ll take off in at least one or two forays. Our approach is investing in specific business areas that we are confident we can excel in. We are very clear in which direction we want to go, and we’ll take the necessary steps. Shipbuilding and signalling will be our next engines for growth. They have the potential to be very large businesses,” Chowdhary told Business Standard in a virtual interaction.

 

Finance Minister Nirmala Sitharaman — in her Union Budget speech — unveiled a slew of measures to open the Indian maritime economy, including a ₹25,000-crore maritime development fund, tax breaks, and a new shipbuilding subsidy policy.

 

Since then, several global shipbuilding companies have docked at Indian shores to scout for possible collaborations in the Centre’s proposed shipbuilding cluster policy.

 

From the get go, Titagarh will look to compete on an even footing in the sector despite the entry of global shipping and engineering giants, even though it is inexperienced in building large ships.

 

The company is working on a capital expenditure (capex) and business opportunity plan, which Chowdhary could not disclose as internal deliberations are being firmed up. He said the company is open to technology collaborations with international players.

 

In signalling and safety systems, the company, for now, will focus on three core areas where it can leverage on its engineering and manufacturing capabilities — train control, vehicle and train-mounted systems, and asset condition monitoring.

 

Having built technological capacities to supply to foreign, especially European markets, the company also wants to become a global name.

 

“Our ambitions are clear. We do not want to remain an India-only company. We want to make in India for the world and establish the first Indian multinational company in the railway space,” he said.

 

Speaking about the company’s muted performance in Q3, Chowdhary said there has been a long-standing problem of wheelsets for wagons produced at state-owned units. This affected production, but now the railways has allowed wagon makers to import wheels.

 

“The railways has taken necessary steps and started adding capacity at its production units— it expects to see results by April. However, there was a major shortage across the sector in Q3,” he said, adding that supply in the present quarter will be better.

 

The company also expects the extra wheels from its forged wheels facility in Chennai to feed into its component ecosystem for its own freight and passenger businesses.

 

After the Indian Railways experienced an acute crisis of forged wheels due to the Russia-Ukraine war and production halts at the RINL Rae Bareli facility, it had to import wheels. This was even so for the indigenous Vande Bharat train, for which it acquired from China. This triggered criticism amid the government’s ongoing efforts to reduce dependence on Chinese components.

 

In June 2023, the railways awarded a ₹12,000 crore contract for the manufacturing of 1.5 million forged wheels over 20 years to a consortium of Titagarh Rail Systems and Ramkrishna Forgings. 

 

“Honestly, we are not concerned about the demand outlook and neither are we very concerned about the railways' freight numbers. This is because in a transformation of this size and scale, it is normal to face a few bumps in the road here and there. But that doesn't mean that the big picture changes,” Chowdhary said.

 

In October, the company had also short-closed a tranche of 3,089 wagons from its mega tender with the railways. It wants to build a better parity between government and private orders.

 

Chowdhary expects government orders to account for 75-80 per cent of the company’s order book, going forward.

 

The company’s current ₹12,007-crore order book consists of 13,689 wagons and 1,589 Metro and Vande Bharat coaches — with a 57 per cent share of the freight business.

 

Chowdhary expects rapid growth in the passenger business. According to Titagarh’s investor presentation, it sees an opportunity pipeline of ₹87,000 crore in Metro coaches and Vande Bharat trains in 2025.