Rail Vikas Nigam Limited incorporated as a PSU on 24-01-2003. Commenced operations in 2005. Project executing arm of Indian Railways. Consistently contributes > 37% of Doubling of Railway Lines and 28% of Railway Electrification commissioned on Indian Railways.
RVNL – Can budgets bolster the growth for the company?
1 Trillion ₹(13 billion USD) project expenditure by Jan’ 2022. 11 billion USD from 2014-15. ‘Mini Ratna’ – upgradation to ‘Navratna’ in process.
Commissioned 121 Indian Railway projects as on 30th Sep. 2022. Current Order book ₹550.00 billion (USD 6.64 billion) which includes 66 Projects (assigned by MoR) + 13 (through bidding) projects.
Business model (MoR assigned Projects) – Revenue stream
• RVNL generates consolidated management fees (inclusive of supervision charges) on the total expenses incurred for the projects at the following margins – 9.25% for the metro projects – 8.50% for other plan heads – 10.00% for national projects.
• Borrowings on the book are a pass-through entry where in interest and principal repayments are borne by the MoR
Path breaking efforts in Railway Infrastructure
• Employer entity of Ministry of Railways.
• ‘Concept to commissioning’ – FLS, DPR, Plans & GADs, land, Commissioning.
• Innovative execution model - excellent contract management practices.
• Evolved into one of the Government’s biggest Capex spenders.
• Mandated to constitute project specific SPVs….and successfully commissioned.
• 100 % dedicated to IR.
Expertise in undertaking all stages of project development and execution from conceptualization to commissioning
• Augmenting the rail network by laying new lines- connectivity to areas not connected to the rail network.
• Aimed to achieve seamless multi modal transportation network across the country • Provisioning of additional lines along the existing tracks- to ease out traffic constraints.
• Consistently commissioned one-third of the projects annually for the Indian Railways
• Includes conversion of metre gauge lines to broad gauge railway lines
• Electrification of the current un-electrified rail network and the new rail network.
• Consistently commissioned 25-30 % of the projects annually for the Indian Railways.
• Electrification would lead to– Reduced fuel bill – Reduce dependence on fossil fuel – Improved operational efficiency
• Setting up of metro lines and suburban networks in Kolkata, Hyderabad, Indore, Chennai and Surat.
• Includes but is not limited to construction of workshops (for production and maintenance of railway inventory), construction of bridges including rail over bridges, institutional buildings, marine works etc.
Diversifying away from Railway
RVNL has started bidding for projects and has participated in a tender of ₹250bn. It has won orders of ₹40bn including metro project in Indore, ₹18bn construction of highway in Himachal in HAM, ₹5bn tunnelling in NER and few consultancies.
Order Book as on June 22 stood at ₹550bn, with Nomination orders at ₹510bn and competitive bid orders at ₹40bn. order book. RVNL plans to bid for ₹500bn of order and targeting order inflow of ₹100-150bn in FY23 under competitive bidding in a ratio of 1:1 in railway and others.
Current order book of ₹550bn including competitive bid project of Rs40bn. RVNL plans to bid for ₹500bn of order and Targeting order inflow of ₹100-150bn in FY23 under competitive bidding. For the high speed rail project, RVNL has submitted a bid in a JV with a Japanese company. Expect order to be received in FY23E.
Competitive bid projects will earn RVNL EBITDA margin of 6-8% and will be more than nomination based projects where RVNL earn 6%. Going forward targeting competitive orders from railway and other sectors in a ratio of 1:1. New sectors are ports, highway, metro, building construction as EPC.
Based on past quarters, on an annual basis 5 times of Q1 revenue. And thus could do revenue of ₹230bn but on conservative basis targeting revenue of ₹210bn+ in FY23E. In FY22 in terms of physical construction, there were 1020 route km of railway line. In Q1FY23 commissioned railway infra of 216 km vs 130km YoY.
Overall for FY23 will surpass the construction done in FY22. DPS will be in line with the Dipam guideline and could payout 3035% of PAT payout. Plan to undertake coal SPV projects with a cost of ₹30bn and RVNL share in terms of equity will be 30% with DER 4:1 or 3:1.
Balance sheet, RVNL is a zero debt company. Interest booked is contra entry with RVNL received advance and is booked in other income.
Reconstructon of Pamban Bridge
• 99 span of 18.3 m and 1 span of 72.5 m (Navigational Lift Span).
• Existing navigational span is “Scherzer span”- Roller Lift arrangement.
• Proposed navigational span “Vertical lift span” - Steel through Girder 1200 MT
Development of UTF Harbour Project in Maldives (RVNL has become L-1)
Project: UTF Harbour
Integrated facility for docking/berthing facilities along with repair facilities intended for Maldivian Coast Guard Vessels.
• Client: Ministry of External Affairs, India
• Beneficiary: Maldives National Defence Force (MNDF)
• Location: Sifavaru in the Uthuru Thila Falhu (UTF) Island, Maldives.
• Duration: Construction-24 Months, Defect Liability Period - 24 months.
• Site Handing Over: 30 Days from issue of LoA
Rishikesh-Karanprayag New Rail Link Project-125 km
• Involves construction of 110 km + 95 km tunnels.
• Longest tunnel is 15.2 km long-1 st time use of Tunnel boring machine (TBM) on Indian Railways.
• State of art mechanisation of construction of Tunnels.
Contributing to efficient, reliable supply chains by building robust Workshops and Production Units through 3D approach (Design, Develop, Dedicate). Built 15 Workshop/ Production Units all over the country for production and maintenance of Rail Locomotives, coaches, and components. Support, Enhance & Reinforce efforts of Indian Railways for ‘Atmanirbhar Bharat’ (Make in India) by building workshops.
Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar
Note: This article is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related investment-related decision.
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