Railway stks RVNL, Transrail, others surge up to 11% on higher capex hopes

The capital expenditure (capex) allocation for the railway sector is expected to rise by 20 per cent in Budget 2025-26, according to reports

Shares of railway-related companies have surged by up to 11 per cent on the BSE in Thursday’s intra-day trade amid heavy volumes on expectations of a higher capital expenditure (capex) allocation for the railway sector in the Budget 2025-26.

 

Shares of Transrail Lighting, Rail Vikas Nigam (RVNL), IRCON International, Jupiter Wagons (JWL), Titagarh Wagons, RITES, Indian Railway Finance Corporation (IRFC), Texmaco Rail & Engineering, RateGain Travel Technologies and RailTel Corporation of India are up in the range of 4 per cent and 11 per cent in intraday trade so far today. In comparison, the BSE Sensex was up 0.38 per cent at 77,013, at 10:40 AM.

 

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As per media reports, the capital expenditure (capex) for the railway sector is expected to rise by 20 per cent in FY26 budget. This could raise capex for FY26 to more than Rs 3 trillion from Rs 2.65 trillion allocated in FY25. As per railways' estimates, nearly 80 per cent of the Rs 2.65 trillion allocation has been spent till now, and it expects the balance to be spent in this fiscal year. 

 

The higher allocation would be incurred on laying new tracks, upgrading existing ones and buying rolling stock - locomotives, wagons and coaches. The railways will also start Vande Bharat sleeper trains that will provide improved comfort for passengers over long journeys. The National High Speed Rail Corp had received Rs 21, 000 crore in FY25, and it is expected to receive a higher allocation for faster infrastructure development on this crucial corridor.

 

A higher target for investments under the public private partnership (PPP) route is also expected in FY26. The Indian Railways had planned a capital expenditure of Rs 10,000 crore through PPPs in the current fiscal year, of which nearly 90 per cent has been achieved by mid-January, the Economic Times reported.

 

Meanwhile, the railways is the largest consumer of wagons in the country. The outlook for the wagon industry mainly depends on demand and budgeted allocation for such outlays. The Government of India is focusing on improving the country's railway infrastructure and ensuring faster development and completion of tracks, rail electrification, rolling stock manufacturing and delivering passenger freight services, according to CARE Ratings.

 

Among the individual stocks, Transrail Lighting has surged 11 per cent to Rs 662.90 in intraday trades so far today. The company made its stock market debut on December 27, 2024. Currently, the stock is trading 53 per cent higher over its issue price of Rs 432 per share. It had hit a 52-week high of Rs 719.15, on January 6, 2025.

 

Transrail's order book has grown significantly in the past 2-3 fiscals supporting the growth in revenue in recent fiscals. Revenues for the company have grown at a compounded annual growth rate of 20 per cent over the last three fiscal years ending 2024, and a healthy growth of upwards of 20 per cent is expected in the fiscal 2025. The company's order book is geographically diversified with approximately 55-60 per cent being international orders and remaining domestic.

 

Transrail has an unexecuted order of around Rs 3,100 crore towards a river crossing project in Bangladesh that has seen delays in appointment of engineering consultant and design approvals from the client’s end in the past. In the current fiscal, there were delays of around 15-20 days due to the political unrest in Bangladesh. 

 

The project is currently working at a healthy pace with payments being received from the counterparty on a timely basis. Transrail expects a healthy revenue contribution from this project in fiscal 2025 and fiscal 2026. The execution of this project and its contribution to scale and profitability of Transrail and timely receipt of payments from the counterparty will remain key monitorables and a rating sensitivity, CRISIL Ratings said in rationale.

 

Shares of RVNL rallied 9 per cent to Rs 406.10 in intraday trade, surging 13 per cent in three days. The company, on Wednesday, January 15, said that it has received a Letter of Acceptance from Bharat Sanchar Nigam Limited (BSNL) for the development (creation, upgradation and operation and maintenance) of Middle mile network of Bharat Net on design build operate and maintain (DBOM) model.

 

The project will be executed in partnership with its consortium members HFCL and ATS, with RVNL serving as the lead member. The total contract value stands at Rs 3,622.14 crore, including operational expenses for a 10-year maintenance period. The project will involve a three-year construction phase, followed by a maintenance period split into two five-year intervals.