On the fast track

For Titagarh Wagons, 2008-09 was an action-packed year, says Anil Kumar Agarwal, CFO. The wagonmaker got listed on the BSE and NSE in April, it launched a subsidiary Greysham & Co. to make braking systems, began work with the S.K. Birla group to revive Cimmco Birla, bought a non-banking finance company when it saw an opportunity in wagon leasing, and floated a 49:51 joint venture with FreightCar America Inc. to make aluminium wagons.

Best in Liquidity Management (Mid-size Company) ANIL K. AGARWAL, CFO/ Titagarh Wagons Winning move during 2008-09: Successful IPO, began work on revival of a sick company. Challenge ahead: Grabbing share of wagon leasing business. Most likely to be heard saying: "We don't have any longterm debt."

Why this flurry of activity? Agarwal says, "Everything was done in a planned manner… we completed one event and then began the next." The action actually began in 2006 February, when Titagarh attracted its first private equity (PE) funding. "That PE deal was the most important since it was the first for us," recalls Agarwal. PE fund raising continued through 2006-07 and 2007-08, fetching it some Rs 123 crore. The year 2008-09 began with Titagarh's listing on the stock exchanges in April.

Titagarh is usually protected from market vagaries because a big chunk of its wagon orders comes from Indian Railways, which makes advance payments. But 2008-09 was tricky because almost 70 per cent of the orders were from private players eyeing the wagon leasing business, and only 30 per cent from Indian Railways.

"We don't have any long-term debt and use internal accruals to meet our requirements. We also have a sanctioned working capital facility of Rs 50 crore," says Agarwal. "We hardly use this working capital facility to the limit, but during that year had to use it on an average basis throughout," Agarwal says.

In March, the Board for Industrial & Financial Reconstruction (BIFR) cleared a revival plan for Cimmco Birla drawn up by Titagarh and the S.K. Birla group. "In 2008-09, apart from the listing in April, the Cimmco transaction was the most important and took up a lot of time throughout the year," says Agarwal. As Kolkata-based analyst Barun Das pointed out, PE funds' infusion was the start of the improvement in liquidity management at Titagarh Wagons. "First, the deal signified that market confidence in Titagarh was returning. This in turn had a salutary effect of encouraging more such deals, with the consequential effect of reducing dependence on borrowings," Das says.

But Das points out that "the difficult part of managing working capital will now start with increased offtake from the private sector. What will help though is the NBFC for leasing wagons that Titagarh is likely to offer its customers now."