Wagon manufacturers project 20% revenue growth amid robust demand

Wagon manufacturer: Wagon manufacturers are expected to rake in about 20 per cent revenue growth in the current fiscal, driven by a healthy order backlog, the release by Crisil Rating showed.  This will be for 65 per cent of the industry's wagon-making capacity—around 40,000 wagons annually— pointing towards better operational efficiencies raising operating margins by around 100 basis points, translating into stronger cash accrual.

Official actions engender railway efficiency in transport.

Rail transport share in logistics is to be increased from 27 per cent to 45 per cent by 2030. Because logistics costs constitute 14 per cent of India's GDP , far more than the 8-10 per cent in the US and parts of Europe. This is achieved by increasing wagon availability; over 90,000 wagons were ordered in the last two fiscal years-alone, much higher than the decade's average of 10,000 wagons annually.

Booming Demand for Wagons from the Private Sector

Private players in the steel, coal, and logistics sectors are also availing the Liberalised Wagons Investment Scheme. Most of these private orders attract a premium of 10-15 per cent due to limited competition, which also further improves the financial prospects of the wagon industry.

Improving Capacity Utilisation and Financial Parameters

Order books are about 2.3 times their revenue from the previous fiscal, and with wagon manufacturers likely to operate at around 90 percent capacity - up significantly from the less than 50 percent capacity utilization witnessed in fiscal 2021 - operating margins are expected to rise to about 12.5 percent, leading to strengthened accruals.

Watch for Policy Changes

In a positive trend, there is still a need for stakeholders to stay alert and ensure they monitor any changes that are likely to occur in government orders or policies, which will affect private ownership of wagons in future growth trends.