IRCON, IRFC, RVNL, IRCTC: Railway stocks rally ahead of Budget. Key expectations

Shares of Indian Railway Finance Corp Ltd (IRFC) climbed 83 per cent in the last one month while those of Rail Vikas Nigam Ltd have soared 84 per cent during the same period. Shares of IRCON International Ltd surged 63 per cent; IRCTC 24 per cent, Jupiter Wagons Ltd (up 31 per cent) and Titagarh Rail Systems (up 14 per cent) have also gained in the last one month, ahead of the interim Budget. Railways can see a decent jump in capex, considering greater emphasis on railways modernisation and also more Vande Bharat trains, said Prabhudas Lilladher in a note. 

Data showed capital expenditure registered strong 31 per cent YoY growth for April-November FY24 and achieved 59 per cent of BE against the last 10-year average of 58.5 per cent. Among major capex-oriented ministries, railways (71 per cent of BE) has been the frontrunner, PhillipCapital noted.

Elara Capital said the government has been prioritising capital spending, especially for railways, roads and defence. It expects this focus to continue, albeit at a moderate pace.

"We project FY25E capital expenditure to rise 20% on the back of 30.5 per cent growth in FY24E, which is lower than the budgeted growth of 37.4 per cent. We also do not rule out trimming of the budgeted allocation for the interest free 50-year loan to the states from the Centre by Rs 30,000 crore. Of the overall capex by the Centre, we see 60 per cent to be allocated to roads, railways and defence," it said.

The capex quality (roads, railways, etc.) can be maintained  by curbing some spends such as on recapitalisation, Kotak Institutional Equities.

Sharing his Budget expectations, Vivek Lohia, Managing Director at Jupiter Wagons said  his expectations for the Budget revolve around advocating decongestion measures and strategic planning and fostering indigenous manufacturing.

“The infrastructural boost towards improvement of the National Rail Network needs to continue and the 3000 MT mission must not get diluted by any means. Rolling stock-up upgradation and modernisation need to fast-track for better efficiency in revenue generation. Procurement of Rolling Stock assets to remain a high-priority subject. The number of wagons going to be overaged between 2024 and 2031 is anticipated to be around 45,000 and it is essential that the new stocks must be added at a much higher rate,” he said.

ICRA said in its Budget expectations note said the FY2025 target for the government’s capital spending, a key engine of growth, would be keenly awaited. We continue to expect adequate allocations towards the infra sectors such as roads, highways, railways, etc. in FY2025 in the backdrop of healthy domestic growth amid tepid external outlook, it said.

 

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