Ircon zooms 15%, IRFC m-cap hits Rs 1 trn: Why are railway stocks buzzing?

Shares of railway related stocks were on a roll, soaring up to 15 per cent on the bourses, amid heavy volumes on reports that the US, Saudi Arabia, India, and other nations are discussing a possible infrastructure deal that could reconfigure trade between the Gulf and South Asia, linking Middle Eastern countries by railways and connecting to India by port. The plan is to counter China's Belt and Road global infrastructure push with a US backup.

Among the stocks, Ircon International hit a new high of Rs 153.65, surging 15 per cent on the BSE in Monday's intraday trade. The counter saw huge trading volumes with nearly 26 million equity shares cumulatively changing hands in the first 11 minutes of trade on the NSE and BSE.

Ircon is a leading turnkey construction company in the public sector (under Ministry of Railways). The company has executed projects operated in the areas of railway construction including ballast less track, electrification, tunneling, signal & telecommunication as well as leasing of locos, construction of roads, highways, commercial, industrial & residential buildings and complexes, airport runway and hangars, metro, and mass rapid transit system, etc.

Meanwhile, shares of Indian Railway Finance Corporation (IRFC), too, hit a new high of Rs 84.50, rising 10 per cent in the intraday trade. In the past seven trading days, it has zoomed 68 per cent. A sharp rally in the stock price of the company has taken the market capitalisation of IRFC above Rs 1 trillion. Currently, IRFC's market cap stands at Rs 1.11 trillion, BSE data shows.

The company's principal business is to borrow funds from financial markets to finance the acquisition/creation of rolling stock / project assets, which are then leased out to the Indian Railways as a finance lease.

IRFC is a Schedule ‘A’ Public Sector Enterprise under the administrative control of the Ministry of Railways (MoR). IRFC has played a significant role in supporting the expansion of the Indian Railways and related entities by financing a significant proportion of its annual plan outlay.

Shares of Rail Vikas Nigam also soared 10 per cent to Rs 178.90, while RITES gained 6 per cent to Rs 583.45 on the BSE in intraday trade. In comparison, the S&P BSE Sensex was up 0.35 per cent at 66,834 at 9:35 AM.

Infrastructure plays a huge role in propelling other industries and India’s overall development. The government, therefore, focuses on the development of infrastructure and construction services through focused policies such as open FDI norms, large budget allocation to the infrastructure sector, smart cities mission, etc.

PM launched Gati Shakti Master Plan to integrate different modes of transportation and increase the speed of operational capacities and commercial policy initiatives to increase modal share of the Railways in freight to 45 per cent from 27 per cent. In National Rail Plan (NRP), new Dedicated Freight Corridors and High-Speed Rail Corridors have been identified.

A capital outlay of Rs 2.40 trillion ($ 29 billion) has been provided for the Railways in Budget 2023, which is the highest-ever outlay. Indian Railways is also exploring a new public-private partnership (PPP) model to attract private investment to redevelop railway stations.