TEXRAIL - Texmaco Rail & Engineering Limited Share Price

Management Outlook and Key Points:

Outlook:
Texmaco's management remains confident in growth prospects, driven by strong order execution, strategic initiatives, and favorable market dynamics. They aim to enhance operational efficiency, expand capacity (particularly in steel foundries and specialized wagons), and capitalize on domestic and export opportunities. The merger of Texmaco West Rail and restructuring of Infra-Rail & Green Energy into a subsidiary are expected to streamline operations and unlock synergies.

Major Points:

1. Operational Performance:

   • Q3 FY25 revenue: Rs.1,326 crore; EBITDA margin: 10.5%.
   • Delivered 2,714 freight cars (54.6% YoY growth); 8,015 wagons delivered in 9M FY25 (70% YoY growth).
   • Wheelset shortages (resolved via imports) temporarily impacted Q3 production but expect normalization by April 2025.

2. Strategic Initiatives:

   • Board approved merger of Texmaco West Rail (ex-Jindal Rail) to consolidate manufacturing capabilities.
   • Transfer of Infra-Rail & Green Energy (EPC business) to a 100% subsidiary to focus on rail infrastructure opportunities.

3. Financial Strength:

   • Credit rating upgraded to CARE A (long-term) and CARE A1 (short-term).
   • Steel foundry expansion (Odisha) to boost capacity to 80,000 MT by mid-2026, targeting domestic and export markets.

4. Market Opportunities:

   • Strong order book (~Rs.7,600 crore; 11,500+ wagons).
   • Private wagon demand rising (25% of current orders vs. 10% historically).
   • Export potential in castings (US, Australia) and specialized wagons (e.g., refrigerated, auto carriers).

5. Sector Tailwinds:

   • Government focus on rail infrastructure (track, signaling) and freight logistics (coal, mining, auto).
   • Vande Bharat sleeper coach interiors and metro projects present future growth avenues.

Risks Mitigated: Geopolitical uncertainties, supply chain disruptions. Management remains bullish on India's rail growth trajectory, emphasizing operational agility and diversified revenue streams.

Question 1:
Sir, my first question is on the freight wagon side. If I look at your stand-alone numbers, these numbers are falling. And at the same time, if we look at the recent budget... there is no increase in the railing stock budget amount. So can you please put some color like, is it like, the TAM is not growing for us in the freight wagon side?
Answer:
The railway budget saw a 7.5% overall increase, with rolling stock allocations stable (~Rs.46,000 crores). The long-term plan (rail share in logistics to reach ~47% by 2030) remains intact. Demand for wagons will grow with sectors like coal, mining, and containerization, ensuring sustained opportunities despite flat budget figures.

Question 2:
Do you expect order inflow in the near term, particularly from the freight wagon side from IR?
Answer:
Orders are expected to continue as IR's 3-year procurement plan (2022"“2025) progresses. Specialized wagons (e.g., for coal, mining) and private-sector demand will drive inflows. The merger of Texmaco West Rail and focus on infrastructure projects will further support growth.

Question 3:
Can you give us a number of Jindal revenues for the quarter and number of wagons produced by the Jindal Rail?
Answer:
Jindal Rail (now Texmaco West) produced 526 wagons (Q3 FY25) with revenue of Rs.265 crores and PBT of Rs.35.72 crores. For 9M FY25, it delivered 1,417 wagons, revenue of Rs.692 crores, and PBT of Rs.98.45 crores.

Question 4:
What is our steel foundry captive consumption as we have around 45,000 tons of capacity?
Answer:
Current capacity is 48,000 metric tons, with 90% used captively for Heavy Engineering and Texmaco West. Odisha's expansion (total capacity 80,000 metric tons) will be operational by mid-2026, targeting domestic and export markets.

Question 5:
Is the shortage of the wheel supply expected to be a problem for the remaining year as well?
Answer:
Wheelset shortages (due to Rail Wheel Factory delays) have been resolved via imports (approved by IR until April 2026). Most wheels are sourced from China. Costs remain competitive, and production is back on track.

Question 6:
Why is interest cost lower this quarter compared to Q2? What can we expect next year?
Answer:
Higher unutilized credit limits post-Jindal acquisition in Q2 reduced interest costs temporarily. Q3 normalized to Rs.32.93 crores. Future focus: operational efficiency to optimize finance costs amid growth.

Question 7:
Are we into double-deck wagons also?
Answer:
Yes, Texmaco supplies next-gen double-deck wagons (ACT 1/2/3) for SUVs and vehicles. Orders include specialized refrigerated wagons (e.g., for Amul). Design excellence and global capability centers drive innovation.

Question 8:
What is your expected turnover in the next 3 years?
Answer:
Management refrained from specific guidance but emphasized growth through operational efficiency, expanded capacities (e.g., steel foundry), and diversification (EPC, exports). Historical trends indicate steady upward trajectory.

Question 9:
How do flat FY26 railway budget allocations impact order inflows? Is there a shift in freight strategy?
Answer:
No mindset shift: rail freight remains critical for logistics cost reduction and decarbonization. IR's focus on track expansion, electrification, and private partnerships will sustain demand. Private wagon share rose to 25% of orders.

Question 10:
What are the risks to exports (e.g., casting) amid US policy changes?
Answer:
US demand for rail renewals remains strong. Texmaco's cost efficiency, quality, and diversification (e.g., Australia mining) mitigate risks. Geopolitical dynamics favor Indian suppliers due to competitive pricing and reliability.