In an interview to CNBC-TV18, SK Nevatia, CMD, Hind Rectifiers , said he expecting a good industry-friendly Budget this time. Moreover, he sees strong ordering on wagons and engines in the Rail Budget.
He thinks the full benefits of the Rail Budget will only be seen in FY16 and feels the Railways will contribute around 60 percent to the anticipated turnover in FY15.
Vivek Sahai, Former Chairman of the Railway Board, feels more public-private-partnership should be encouraged in the sector, which should also focus on construction.
He expects Konkan Railways to make profits after years of losses.
Below is the transcript of SK Nevatia and Vivek Sahai's interview with Sonia Shenoy and Latha Venkatesh of CNBC-TV18.
Latha: What are the points that you will lookout for, which exact statements either in terms of wagons or in terms of signalling systems, what will you lookout for in today's Budget?
Nevatia: After four years I am expecting a good industry friendly Budget. All the manufacturing units of the railways, the Chittaranjan Locomotive Works (CLW), the Integral Coach Factory (ICF) Chennai, Rail Coach Factory (RCF) Kapurthala and Diesel Loco Modernisation Works (DMW) would be going in for big railway coaches and locomotives. I am expecting CLW to have about 275 loco orders in the next financial year and I expect about 200 coaches to be made by ICF Chennai and RCF about 250 coaches and 125 coaches made by DMW Varanasi. So, I am expecting a good Budget.
I am expecting that CLW would require about 275 locomotives; 100 will be conventional and 175 would be three-phase. If they are not able to manufacture 175 three-phase then they will increase the conventional. I am expecting about 200 coaches to be built by ICF and about 250 coaches required by RCF Kapurthala and about 125 by DMW Varanasi. So, it is a good quantity and all of us who are connected to the railways in various ways should benefit.
Sonia: Let us talk about the other expectation which is the possibility of raising foreign direct investment (FDI) in railways to 100 percent. If that comes through how much of a benefit would it be in the sense how much interest have you seen from foreign investors in the sector itself?
Nevatia: Foreign investors if they are allowed to setup unit here then we expect them to buy rectifiers and some things locally. They will not bring everything here which is made here and available at a competitive rate. So, if foreigners like Bombardier and others are allowed to setup factories here, the Indian part will benefit because some of the part they will outsource from here rather than import and increase their cost.
Latha: One of the fundamental issues with the Indian railways is that it moves just 30-32 percent of India's freight. In almost every other country globally the average is 70 percent. Is there anything, one or two game changing things that the government can do to improve this margin at least from 30 percent to 35-40 percent?
Sahai: We have been losing railway share in the freight traffic which is being offered in the country. We are at 36 percent at the moment and the trend is by 2020 it may reach 25 percent and that is the most important point because if the freight traffic goes down our earnings can never be ahead of the expenditure. So, railways have to find ways and means to get the traffic back.
Two-three things which come in the way are, first there is an acute shortage capacity in the system. Wagons now are quite alright but tracks; the running of trains is required at least 30-40 percent more than what is there today. Indian Railways has 64,000 kilometre of track; the route kilometre and nearly 25,000 kilometre is running at more than 100 percent capacity utilisation. In fact there are some sections where the capacity utilisation is gone around 150 percent which means the traffic is running slow. It is like a congested road. So, what is happening is the railway is not able to give comfort to the customer that they would be able to supply the wagon when he needs. So, that is the first point that we have to create more capacity.
Hind Rectifiers stock price
On July 08, 2014, at 11:11 hrs Hind Rectifiers was quoting at Rs 61.05, up Rs 1.30, or 2.18 percent. The 52-week high of the share was Rs 65.75 and the 52-week low was Rs 28.50.
The latest book value of the company is Rs 43.54 per share. At current value, the price-to-book value of the company was 1.40.
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