While shares of Railtel Corp of India gained 15% on Monday, Texmaco Rail & Engineering surged 13%. Stocks such as Rites, BEML, Indian Railway Catering, and Rail Vikas Nigam gained between 3% and 5%.
“Focus on infrastructure in order to revive the capex cycle has been one of the key themes for the government, which led to the Railways getting the highest ever budget allocation in this year’s budget,” said Vaibhav Shah, fund manager at Torus Oro Portfolio Management Services. “The recent announcement of renovation of 508 railway stations provides further impetus to railway themes. Amrit Bharat Station Scheme, upscale to Vande Bharat coaches, and launch of Vande Bharat trains on many routes provide a long-term structural theme for investment.”
According to reports, the total cost for redevelopment of these stations would be close to ₹24,500 crore.
In her Union Budget speech on February 1, finance minister Nirmala Sitharaman announced a 75% increase in the allocation of ₹2.4 lakh crore for the Railways in the financial year 2023-24 as against ₹1.40 lakh crore last fiscal. In the past month, shares of Texmaco Rail, IRFC, Railtel, BEML, Titagarh Rail and Ircon International rallied between 17% and 42%.
According to Bloomberg consensus estimates, Ircon International and Rail Vikas Nigam have an upside of 17% and 33%.
Some analysts have turned cautious about the near-term prospects of these stocks as they may have run up too soon. “We expect the companies associated with Indian Railways to do well on the back of order intake, stronger order book execution, which will translate into top-line and bottom-line growth,” said Gaurang Shah, senior vice president at Geojit Financial Services. “However, investors need to have a long-term horizon as order execution will take time, and it will also take some time to translate the transformation of order execution into top-line and bottom-line growth.”
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