Pradeep Gaur's leadership pushed the PSU Rail Vikas Nigam Ltd into the big league; here's how

As one of the oldest-serving employees of Rail Vikas Nigam Ltd (RVNL), Pradeep Gaur, its current Chairman and Managing Director, has seen the rail PSU come into its own.

RVNL was incorporated in 2003 with the twin objectives of implementing projects related to creating and augmenting the capacity of rail infrastructure on a fast-track basis and raising extra budgetary resources for SPV (special purpose vehicle) projects. It began operations in 2005, and Gaur, a 1987 batch IRSE (Indian Railway Service of Engineers) officer, joined RVNL soon after.

Over the past 19 years, he has seen the company grow and has also played a significant role in its transformation in recent times after he became its chief in 2018. He also oversaw the company’s listing in 2019, when the government sold 12.12% stake.

“I’m one of the longest-serving people in this organisation. I joined it from Indian Railways on deputation in 2005 and was later absorbed [into it]. So, I have been here almost since its inception,” Gaur tells BT. Based on this long association, he confidently states that RVNL has evolved into a very capable project executing organisation with very high technical capabilities. “It has developed a lot of resiliency and can spring back from any pushback,” says Gaur.

But it hasn’t been easy going. When Gaur took charge as CMD about five and a half years ago, RVNL faced a number of challenges. Project execution was slow, and a large number of projects were languishing. So, Gaur’s first task was to bring these to order and get them commissioned.

Then the Covid-19 pandemic struck, and RVNL’s focus shifted to saving the lives of the workers at its various project sites and ensuring they got adequate support. But by far the biggest challenge it had to navigate was the decision of the Ministry of Railways to move from execution of projects on a nomination basis to competitive bidding, which meant that RVNL no longer had the advantage of getting projects straight off from the Railways. That being the case, it had to also foray into non-railway projects.

“At that time, it was a huge challenge to foray into a different business altogether that we were not used to and had to take projects on bidding. I will give full credit to the resilience of the organisation for being able to rise to the occasion because it was an extremely difficult proposition. RVNL consists 100% of officers and staff from the Railways, and they were not used to this,” recalls Gaur.

The company took this up as a challenge, and Gaur believes that the change in orientation has opened up a whole new vista of opportunities in various sectors.

Over the past few years, RVNL has diversified into non-railway projects such as ports, national highways, metro rail, and irrigation. It has also moved to other geographies, such as the Maldives, where it is implementing a port project. The UTF (Uthuru Thila Falhu-Island) Harbour project in the Maldives is a strategic project placed by the Ministry of External Affairs (MEA), and RVNL was appointed as the implementing agency in December 2022.

Gaur says that not only is the MEA happy with the pace of work and progress, this project has also shattered the general perception that most Indian PSUs do not perform well abroad. RVNL is now also looking at other regions, has signed a memorandum of understanding with the government of Kyrgyzstan, and has ventured into the solar sector in Uzbekistan and the Middle East.

“As of now, we are into four or five sectors. We will see how the situation evolves. We will not like to spread too much. But we would like to focus on areas that are becoming our strength,” he says.

Its order book stands at about Rs 65,000 crore, of which around 50% is from the nomination, that is the typical railway projects, and 50% is from the market through bidding.

The challenge now with bidding for projects is to remain competitive and also think of the bottom line, says Gaur. “Getting orders is the easier part; the difficult part is executing them well with margins without compromising on the quality of the work, because that is most important,” he adds.

With this in mind, the company, which was granted Navratna status—which is granted to public sector firms that have an excellent or very good MOU rating in three of the past five years, among other parameters—last year, is working on a number of initiatives. This includes rightsizing the organisation, which has about 440 employees right now; imbibing new technologies such as artificial intelligence in segments like finance, HR, bidding, and eventually project execution; exploring innovations and getting the latest technologies in its projects; as well as focussing on execution strategies. Gaur highlights that project execution is RVNL’s core strength.

With an eye on the future, the company has also moved to manufacturing and has signed an agreement with Russian firms Metrowagonmash and Locomotive Electronic Systems for the manufacture and supply of 120 Vande Bharat sleeper train sets. Gaur says this is just the start of the manufacturing journey.

The company is also looking at getting into the data centre business, as it has a strong team of engineers with a background in electronics.

While RVNL reported a 6.2% decline in its net profit in the third quarter of FY24 at Rs 358.6 crore, compared to Rs 382.4 crore in the year-ago period, analysts remain upbeat about its prospects.

“RVNL was formed to carry out critical railway projects. By design, there was a nomination clause for railway orders, which helped RVNL in shoring up the order backlog. Its performance has been spectacular over the past 10 years, with a 26% CAGR in revenues and a 24% CAGR in profits,” notes Rohit Natarajan, Vice President and Research Analyst at Antique Stock Broking.

However, the government’s policy on railways has changed, and so have the priorities. “RVNL will also have to transform itself, and how it adapts will be critical for the company’s future,” says Natarajan. He adds that it will have to focus on new sectors, such as manufacturing and international projects, where it is already making headway.

“It has a Rs 35,000-crore project in Kyrgyzstan and has also bid for the Rs 83,000-crore Trans Kalahari Railway Project [in Africa]. It also has an order backlog [of Rs 65,000 crore] for domestic projects. “With the possibility of a Rs 14,400-crore railway contract manufacturing order, RVNL has the potential to transform its order book to Rs 2 lakh crore by FY26, which will be a big task for the company,” he says.

Vikas Gupta, smallcase Manager and CEO, Chief Investment Strategist, at investment advisory OmniScience Capital, also notes that RVNL has been growing at a steady pace, with profits increasing consistently. “It has a large order book of over Rs 65,000 crore and is targeting an order book of Rs 1 lakh crore for FY24. Given the large capex planned by the Railways and RVNL’s diversification outside railways into other sectors and other countries, the order book is likely to get bigger,” he says.

The Navratna status will give it significant financial freedom in terms of capex and the choice of investing in particular projects, he says, adding that this should help in the quick turnaround of new projects.

With nearly a year and a half left before his retirement, Gaur has much more left to do. It is thanks to this enterprising attitude that he’s been adjudged the winner in the PSU category of BT-PwC India’s Best CEO ranking this year. 

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