Railway Stocks Rally : Top 5 Railway Stocks to Pick

Introduction

Indian Railways, a symbol of connection and progress, is a significant force driving India's economic growth. Its widespread network, ambitious expansion plans, and crucial role in building infrastructure make it a central component for the nation's development. The rhythmic sound of metal on tracks, the piercing whistle, and the vast expanse of a network across the country – Indian Railways is more than just a way to get around. It's a vital link, bringing together the threads of India's economy, a large and ambitious entity of steel and aspiration driving the nation towards prosperity. From its beginning, Indian Railways has been a fundamental part of India's growth narrative, connecting people, facilitating trade, and promoting industrial development. Presently, with its ambitious plans for expansion and steadfast commitment to modernization, it stands ready to play a key role in India's economic progress. This blog delves into the meaningful impact of Indian Railways on the economy, emphasising its role as a catalyst for ongoing economic progress and envisioning its future growth path.

 

The Importance of Railways

Railways play a crucial role in connecting people and goods across the country. They provide an efficient and cost-effective mode of transportation, enabling the movement of goods and people at a large scale. The Indian railway network is the fourth largest in the world, covering more than 67,000 kilometres and serving millions of passengers daily.

 

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Government Investments and FDI

The Indian government has recognized the importance of railways in driving economic growth and has made significant investments in the sector. In the financial year 2020-21, the government announced a 2.4 trillion rupee investment, which accounted for 33% of the total budget allocation for capital expenditure. Additionally, foreign direct investment (FDI) in railways has also played a crucial role in funding infrastructure projects. In April to June, FDI in railway-related stocks reached $1.23 billion, highlighting the confidence of international investors in the sector.

 

Mega Projects and Expansion Plans

Indian Railways has embarked on several mega projects to enhance its capacity and connectivity. The dedicated freight corridor, Mumbai-Ahmedabad bullet train, and the introduction of one-day Bharat trains are some of the major initiatives aimed at improving transportation efficiency. The government plans to invest 4.2 lakh crore rupees in these projects, ensuring a substantial increase in railway traffic and improving logistic costs.

 

Industry Growth and Market Share

The growth of the railway sector has had a positive impact on the industry as a whole. Companies involved in manufacturing railway wagons, tracks, coaches, and project finance have witnessed significant growth. One such company, with a market cap of 73%, has seen a compounded annual growth rate of 25% in profit and 41% in order book. The Modi government's focus on railways and its commitment to public infrastructure development has further boosted the industry's growth.

 

 

These are the stock you should focus upon which are currently trending due to impact on Railway sector : 

 

1.IRCON (Indian Railway Construction Company Limited)

IRCON, with a market cap of 15140 Cr, boasts an order book of 32500 Cr in Q1FY24, of which 73% is attributed to railways. Being one of the top 250 international contractors, its compounded profit growth over the last 5 years is a consistent 13%. The recent contract with Sri Lanka Railways valued at 122 Cr adds to its positive trajectory.

 

2.JWL (Jupiter Wagons Ltd)

JWL specializes in the production of train wagons, securing a 70% revenue from this segment. Holding a 25% market share in the industry, it anticipates producing over 12000 wagons out of the 50-55 thousand announced by the railways in the next 1.5 years. With a compounded profit growth of 40% over the last 5 years, JWL presents a compelling case for investment.

 

3.TEXRAIL

Texrail, dedicated to manufacturing railway coaches, boasts a market cap of 6166 Cr and an order book of 6450 Cr in the previous fiscal year. With an order book of 9000 Cr in the current fiscal year, aiming to produce over 20000 coaches, it's positioned for substantial growth. The increase in FII and DII holdings reflects growing confidence in Texrail's potential.

 

4.IRFC (Indian Railway Finance Corporation)

As a key funding arm for Indian Railways, IRFC operates on a leasing model, facilitating long-term funding for railway projects. Holding a cumulative funding record of 5.04 lakh crore, its profit growth over the last 5 years stands at 25.3%, accompanied by a commendable dividend payout of 30.7%. With 86.36% holding by the President of India, IRFC remains a cornerstone in financing large-scale railway projects.

 

 

Leasing Model and Financing

Railway infrastructure projects often rely on financing and leasing models to fund their operations. The Indian Railway Finance Corporation (IRFC) and companies like RVNL and Ircon play a pivotal role in providing financial assistance to the sector. These companies follow a leasing model, where the assets are leased out for a specified period. This model ensures long-term funding for railway projects and helps in their timely completion.

 

Future Outlook

The future of the Indian railway sector looks promising, with a focus on expansion, modernization, and increased private sector participation. The government's commitment to investing in railways, along with the growth opportunities provided by FDI, will continue to drive the industry's growth. As the demand for transportation increases, the railway sector is expected to witness consistent growth and provide significant economic benefits to the country.

 

Conclusion

As India strides towards global economic success, Indian Railways isn't just keeping up; it's leading the way. With its growing network, strong focus on efficiency, and closer ties with other sectors, Indian Railways is becoming a key player in driving economic progress. By investing in tracks, trains, and technology, India is not just creating a transportation system but also laying the foundation for a brighter future. In the broader picture of India's economic landscape, Indian Railways stands as a vital force connecting progress and connectivity. Its role in boosting economic growth is clear through transformative projects, government support, and international confidence via FDI, pushing the sector to new heights. As the railway sector moves towards a future marked by growth and innovation, its connection to economic prosperity remains strong, promising ongoing growth and lasting benefits for the nation.

Disclaimer:

Please note that this blog is not a recommendation for buying or selling any stock. We encourage readers to conduct thorough research, consider their risk tolerance, and consult with financial advisors before making investment decisions.