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00:00 T-Tugger Rail Systems is a stock that is doing well in trade today.
00:10 The revenues were up 8% in and around the expected lines, but I think on the margin
00:18 front on that business versus the estimates of 11% to do 11.4 and versus a 9.8% number,
00:27 I think that may have helped the street confidence a little bit more.
00:32 Pritish Choudhury joins in to talk about the quarter and the year gone by and the outlook
00:37 ahead.
00:38 Pritish, thanks so much for taking the time out and being with us.
00:39 I want to start off with a comment that came in into the presentation that you guys made
00:46 post results, wherein you've said that the passenger rail system segment got impacted
00:53 on account of near completion of Pune Metro contract, Bangalore Metro and some of the
00:59 others in various stages of execution.
01:01 And when I see the mix as well, there is the revenue contribution that also has seen a
01:06 bit of a downtick there.
01:07 So can you explain, is this an accounting mix?
01:09 Is it one order getting over, newer orders coming in?
01:12 What's happening here?
01:13 Sure.
01:14 So thank you very much for having me with you today.
01:17 And so this is a very known phenomenon that we've been also expressing publicly for a
01:23 while because we got the order for Pune Metro in 2019.
01:27 And now that order is almost entirely executed with I think one train pending to be delivered.
01:34 As far as the other orders that we were awarded, for example, Surat Metro or Ahmedabad Metro
01:39 or Vande Bharat, or even the Bangalore Metro project that we are executing in collaboration
01:43 with CRRC, those will start execution towards the Q2 of this financial year.
01:51 So that is why we see a small impact in the revenue numbers of the passenger rail system
01:57 vertical.
01:58 It is only on account of one order execution and the other orders being in the design stage
02:04 and waiting to start execution in the subsequent quarters.
02:07 Got it.
02:09 So in effect, this business might be lumpy in nature because when a project gets executed,
02:14 it doesn't, I mean, there is little revenue to book, but there is new projects starting
02:17 at some point of time and therefore things will get back to a higher share for the passenger
02:23 rail systems.
02:24 Would that be a fair assessment?
02:26 Going forward, we see actually a lot more growth potential in the passenger rail system
02:31 vertical.
02:32 As you said before, yes.
02:34 So in the next, let's say five years' time, we expect the passenger rail system vertical
02:38 to be almost 60-65% of our total revenues.
02:43 So that is the kind of potential that the passenger rail system business has.
02:46 And as for it being lumpy, it was just, you know, we are the newcomers in this field and
02:51 this is a business that we effectively started in 2019 in India.
02:56 So it is just a ramp up period that you see now.
03:00 And going forward, you will see the execution of all the orders that we've won in the subsequent
03:05 quarters that come up now.
03:07 Got it.
03:08 Now, I'm sticking to the quarter first, the exit margins are looking very strong.
03:14 You guys have always said that it's very difficult to cross the 12% number here.
03:17 You hope to maintain a number between 10 and 12.
03:19 11.5 is very neat.
03:23 Is this, I mean, would this be similar that you would probably clock in at some quarters
03:27 10.5, some quarters 11.5, some quarters 12?
03:30 Difficult to predict that.
03:31 And then therefore, as an average, what do you hope for FY25?
03:36 So I'm going to split this up into the two verticals, which is freight rail system and
03:40 passenger rail system.
03:42 In the freight rail system, we've maintained always that a fair EBITDA margin to look at
03:46 would be between 9 and 11%.
03:49 But now we actually revise that to about 10 to 12% because of the operational leverages
03:54 that we get.
03:55 You know, now we are in the month of March, we produced about 1080 wagons, which is the
04:00 industry highest ever recorded production.
04:02 So with the numbers being, with the production numbers being where they are, we also get
04:07 operational leverage because of which the margins in the freight rail system business
04:12 can be around 10 to 12% on an annual basis.
04:15 Of course, quarter to quarter, they may vary depending on the mix of products delivered,
04:21 you know, whether that's to the railways, whether that's to the private sector, what
04:24 kind of wagons we've made.
04:26 So on an annualized basis, between 10 to 12% is a fair margin to hope for on the freight
04:32 business.
04:33 Now on the passenger business, as of today, we actually have a disadvantage of operational
04:40 leverage, because we've already incurred all the fixed costs to set up the facilities and
04:45 train our people.
04:46 But the production of the orders that we have will only start in this or in the coming quarters.
04:54 So once those projects start execution, and once we're able to produce, let's say 15-20
05:00 which is a month by the end of this year, or by next year, hopefully, we hope that we
05:07 would be at a 10% EBITDA margin.
05:09 Now going forward, once we're able to backward integrate and fully absorb the propulsion
05:14 technology that we have with ADB, at that point, we expect a further enhancement in
05:19 EBITDA.
05:20 So on a company level, we expect that the same 10 to 12% EBITDA margins that we've been
05:26 mentioning on an annual basis would be a fair estimate.
05:28 When do you reach 65% on the passenger rail systems as an aggregate?
05:33 In about five years from now.
05:34 In about five years from now.
05:35 Okay.
05:36 By then, the margins could maybe nudge higher to 11.5%.
05:39 Okay.
05:40 Fair call.
05:41 Now, you are enhancing the passenger rail piece in your overall pie.
05:50 You've done this JV with RK forgings.
05:53 At a point of time in the last 12 to 18 months, when we had spoken to you, you guys had spoken
05:58 about how you are getting into backward integration for producing some other products as well,
06:05 which will get retrofitted into the wagons as well.
06:08 So now tell us, the wagon story is well known.
06:12 You've guided to some numbers.
06:14 You're executing on these numbers in a good way.
06:16 The revenue run rate for the last four years has shown exceptional growth, even on a higher
06:20 base.
06:21 Where does all of this lead to?
06:23 And how do the newer segments contribute to this?
06:28 Sure.
06:29 So on the freight rail system front or on the wagon front, we've hit a production of
06:36 1000 wagons a month in the month of March and in the months preceding that.
06:42 And this year, we hope to stabilize at that run rate.
06:45 So about 1000 wagons, between 950 to 1000 wagons a month.
06:48 Last year, we made about 8400 wagons, which is roughly 700 wagons a month and going up
06:57 to about 950 to 1000 wagons a month in this financial year.
07:01 Now if we come to the other businesses, such as the JVs or the passenger rail system, I
07:05 come to the JVs first, JVs and consortiums that we have.
07:09 So we have a JV with Ram Krishna forging for the forged wheels.
07:12 Now contractually, the deliveries for that would start in June of 2026 or in May of 2026.
07:20 So we still have some time because that factory is currently being set up.
07:23 You know, it's a brand, it's a Greenfield project, and that factory is currently being
07:27 set up.
07:28 When we come to the consortium that we have with BHEL for Vande Bhar, now that prototype
07:34 gets delivered in June 2025.
07:38 So we still have about a year until that prototype is delivered.
07:42 And the production ramp up for that actually happens in FY 26 and 27.
07:46 So the major revenue that would come from the Vande Bhar would actually happen in FY
07:51 26 and 27, not even the coming financial year.
07:55 So you know, as I mentioned just a little while ago, going forward, we expect about
08:01 65% of our revenue to come entirely from the passenger rail system business.
08:06 When I say passenger rail system business, that is not just the coaches, but that is
08:10 also the propulsion systems that we are making.
08:12 We are already supplying traction motors to the Indian railways.
08:14 We're hopeful that we are able to supply our prototype for the EMU propulsion system
08:20 soon, very soon.
08:23 So with all of these things happening now, we expect that in the next few years, the
08:27 passenger rail system vertical will really be our lever for growth.
08:32 Sure.
08:33 Okay, so therefore, how do we look at what kind of growth numbers could come in?
08:38 Because one is to reach 65, 35, but 65 on a base of what?
08:42 Let's say in five years, you're at 65.
08:44 I mean, I don't know what targets you're setting, whether you're setting three year targets
08:47 or five year targets, but at the end of FY 24, it's imperative to try and understand
08:51 what are the targets being set.
08:54 So we ordinarily don't give forward looking numbers or guidance to the markets.
09:00 But what I can comment on is the trend that we managed to establish.
09:03 So if you look at our performance last year, we were at a turnover of a revenue of 2700
09:09 crores, which this year is almost 3850.
09:13 On the EBITDA margins, we're at a 450 crore almost EBITDA this year.
09:19 Just to share an interesting data point with you, in 2018, we were at a revenue of 300
09:24 crores, and today we're at a PAT of 300 crores.
09:28 So that's the kind of potential that exists.
09:30 And that's the kind of growth that we definitely aim to keep providing to the market and to
09:38 the investors.
09:39 So today's revenue is 3800 crores, you become 3800 crores of PAT in five years?
09:50 I mean, if what is signed in the markets are kind, then we'll find out five years later.
09:54 But on a serious note, I mean, you reckon a 30-35% odd kind of growth number is possible
10:01 on the revenue front for FY25?
10:03 I would really not be able to comment on that at this point in time, because we don't give
10:08 any numbers.
10:09 Okay, but I'm just trying to gather from your numbers, you saying that from a 700 wagon
10:15 number, right, on an average, you move to 1000 wagon number, that's roughly 35 to 40%
10:21 growth, give or take?
10:24 Unfortunately, so my maths is not that strong.
10:27 So it could be a 35 to 40% number, but I leave that to the experts.
10:31 Okay, fair call.
10:34 Last question, any fundraise that might happen on the equity side in the next 12 months?
10:40 Not that we envisage at this point of time, last year, we already had a couple of rounds
10:44 of fundraising from the capital markets.
10:46 And at this point in time, we think that should be enough that coupled with our internal approvals
10:51 should be more than enough to sustain the company in terms of the capex plans and all
10:55 of the other plans.
10:56 Great, Pritesh, good chatting with you.
10:58 Thank you so much for taking the time out and all the best for the year ahead.
11:00 Pleasure's all mine.
11:02 Thank you.
11:03 Thank you and viewers, thanks for tuning in.
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