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How Railway Budget Affects Business

  • Dinesh Trivedi, the railway minister announced policies that affect businesses from steel to security systems. The expenditure incurred by railways means contracts for listed companies.

  • The ministry has sought Rs 50,000 crore from the finance Ministry as gross budgetary support (GBS) but has got only Rs 25,000 crore for the next fiscal from the central kitty. The increase in freight rates with effect from 6 March 2012, is expected to give the railway ministry close to Rs 15,000 crore.

  • Here are some pointers that highlight the impact on listed companies:

• Signal system upgrade: The total cost is Rs 39,110 crore over five years. For 2012-13, Rs 2012 crore allocated which is double the allcoation in the previous year. The multi-crore action plan for upgrading of the signal system is slated to cover the 19,000 km long major trunk route such as New Delhi-Mumbai and New Delhi-Kolkata and New Delhi Delhi-Chennai corridors. In-cab signalling system, similar to the technolgy followed in European countries and already available with Delhi Metro, would be aggressively taken up by the railways. Kernex, which specializes in anti-collision signal systems, rose 3 per cent on Wednesday morning. Over the past two weeks, Kernex rose 23 per cent, much higher than the broader market.

• More wagons and coaches: The railways minister has allocated Rs 18,193 crore. This is 30 per cent of the annual plan allocated for coaches, wagons and engines. Companies like Texmaco, Titagarh Wagons, state-owned BEML benefit as a result of this move. Shares of Texmaco rose 11.6 per cent over the past one week while BEML are up 8 per cent.

• New railway lines and modernisation: Trivedi said that the government plans to modernise 19,000 km of railway tracks, which cater to 80 per cent of traffic. Any plan to put up new railway lines could boost steel companies like Jindal Steel and Power. Over the past one week, shares of JSPL rose 12 per cent in anticipation.

• Rail line construction: Besides steel, companies like Kalindee Rail Nirman shares rose over 6 per cent ahead of the budget announcement. This company specializes in construction of railway lines. Traders took to booking profit as the minister announced measures to build new lines. The share price fell 5 per cent.

• New PPP development model: The government is looking at introducing a public-private partnership or PPP model for new development of stations. The minister expects to take up 100 stations to begin with. This could be of interest to companies like Larsen & Toubro, Punj Lloyd and IVRCL. Shares of these companies gained 1-3 per cent on Wednesday.

• Container traffic: Any announcement to the boost container traffic is a positive for companies like Gateway Distripark and Container Corporation. Gateway shares rose 5 per cent over the past one week while Container Corporation of India has shed 10 per cent over two weeks.

• Railways station security systems: The minister is looking to boost railway station security and is expected to allocate resources for systems. Zicom, Nelco, which is now part of Crompton Greaves could be in the play. Zicom shares rose 2.3 per cent on Wednesday while Nelco has gained 4.3 per cent.

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