RAIL VIKAS NIGAM LIMITED
Know the Company
Rail Vikas Nigam Limited (RVNL) is a Navaratna public sector enterprise (PSU), established by the Government of India, under the Ministry of Indian Railways. Incorporated in 2003, Rail Vikas Nigam Limited (RVNL) is primarily dedicated to undertaking railway projects and executing various works associated with railway infrastructure. As of March 31st, 2024, the Government of India holds a 72.84% equity stake in RVNL.
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RVNL is involved in executing various railway projects works across the country, aimed at enhancing the capacity, efficiency, and safety of the Indian Railways network. The Company’s scope of work encompasses the construction of new railway lines, doubling and electrification of existing lines, gauge conversion, re- development of railway stations, and various related projects. Additionally, RVNL’s project portfolio includes infrastructure for metro railways, tunnels, and monumental bridges. RVNL’s operations extends beyond domestic borders to encompass overseas projects.
The Company possesses 28 Project Implementation Units that spread across 26 locations strategically situated to effectively execute projects within their respective geographical domains. These units are located at Ahmedabad, Agra, Bengaluru, Bhopal, Bhubaneshwar (2 Units), Chennai (2 Units), Chandigarh, Jhansi, Kanpur, Kolkata (2 Units), Kharagpur, Kota (2 Units), Lucknow, Nagpur, Patna, Raipur, Rishikesh, Ranchi, Secunderabad, Varanasi (2 Units), Vijayawada and Waltair (2 Units). RVNL’s major client is the Indian Railways and other clients includes various central and state government ministries, departments, and public sector undertakings. RVNL has also participating in Metro, Highways and other infrastructure works through competitive bidding.
Mission and Objectives
RVNL was established with the primary objective of executing rail infrastructure projects such as new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable-stayed bridges, institutional buildings, and more. Additionally, RVNL plays a crucial role in raising extra-budgetary resources through special purpose vehicles (SPV) to facilitate the execution of infra-projects effectively. The Company operates on a turnkey basis, overseeing the complete project development cycle from conceptualization to commissioning. This implies stages such as design, estimate preparation, contract award and project management, etc. Another important objective of the Company is to promote public-private participation in railway-related projects overseen by the Company.
RVNL has established a subsidiary named, The High Speed Rail Corporation of India Limited (HSRC), for development and implementation of high-speed rail projects as well as actively participate in the competitive bidding process among the Infrastructure Sector. HSRC is positioned to provide consultancy services and lead the implementation of high-speed corridors in the foreseeable future. Furthermore, the company aims to expand its operations through its subsidiary, which will be responsible for various tasks including siding construction and maintenance, procurement of machinery for operations and maintenance, execution of solar panel and transmission line projects, facilitation of wagon, coach, and crane exports, involvement in metro rail and high-speed rail construction, etc. This subsidiary stands as the open market bidding arm of the parent company, RVNL.
Strengths
RVNL plays a pivotal role in advancing the development and modernization of India’s railway infrastructure, thereby enhancing the nation’s connectivity and fostering economic growth. The Company applies an asset-light model of operation, leveraging a combination of in-house expertise and partnerships with external agencies and contractors to execute its projects efficiently. This approach enables the company to uphold stringent quality standards and achieve timely project completions, fostering client satisfaction and getting repeat orders as well as maintaining a healthy balance sheet. Recognizing RVNL’s commitment to excellence, the central government offered upon it the prestigious ‘Navratna’ status in 2023.
As of April 2024, RVNL has an order book of approximately Rs 68,000 crores, with roughly 50 percent derived from nominated projects, typical railway assignments, and the remaining 50 percent secured through competitive bidding processes. Out of the present order book, the share of the Vande Bharat trains is around Rs 9,000 crore, and another Rs 7,000 crore for several Metro rail projects. The Company management is confident to maintain an order book of around Rs 75,000 crore in the immediate future. As part of its portfolio diversification strategy, the company has also secured projects in the electrification and transmission lines segments.
With the Government of India’s heightened emphasis on railway infrastructure development, progress is advancing at an unprecedented pace, with RVNL prominently positioned as a key beneficiary of these initiatives. According to company sources, as of March 31, 2014, the total railway infrastructure commissioned by RVNL in its history stood at 5,100 kilometers. However, since then, the company has further commissioned an additional 11,000 kilometers of railway infrastructure. Before 2014, RVNL had commissioned 40 projects, but post-2014, it has successfully completed and handed over operations for 100 projects.
RVNL also actively looking business opportunities in neighboring countries such as Bangladesh, Sri Lanka, Maldives, and Mauritius, as well as exploring markets across the African continent to ensure long-term sustainability in its operations. Furthermore, RVNL has extended its footprint into the UAE and Saudi Arabia too. The Company also has diversified its funding sources by tapping into institutions such as the World Bank, Asian Development Bank (ADB), African Development Bank (AFDB), and has ventured into projects related to solar energy, funded by IREDA.
RVNL’s major clients are Indian Railways and various central and state government ministries, departments, and public sector undertakings. This unique clientele facilitates the company’s seamless mobilization of funds for new projects.
In addition to this RVN is allowed to raise extra- budgetary resources for its project execution.
RVNL has also started participating in Metro Rail, Highways and other infrastructure sectors through competitive bidding. With the work of execution of Kolkata Metro projects, RVNL has developed expertise for implementation of metro rail projects in other cities across the Country.
Financial Results
RVNL reported lower revenue and net profit for the Q3FY24. Its revenue from operations in the third quarter of the FY2023-24 fell by 6.4% to Rs 4,689 crore, compared to Rs 5,012 crore over the same quarter of last year. At the same period, Net profit down 6% to Rs 358 crore compared to Rs 382 crore. EBIT margin stood at 5.3% compared to 5.5% in the same period last year.
Industry Structure
India has the fourth largest railway network in the world with a total length of 68,442 route kilometer, as of March 2023. It runs nearly 22,000 trains daily, out of which around 13,500 are passenger trains that carry more than 2.3 crore passengers. It also runs about 8,500 freight trains that carry around 3.5 million tonnes of freight per day. (Source: Company- AR).
In recent times, Indian railway has been initiated several reforms at both organizational and functional levels to improve efficiency, safety, as well as accelerate project execution. Remarkable reforms include the introduction of participative models for rail connectivity, the incorporation of private train operators, more over a strong focus on encouraging private sector involvement in infrastructure development.
Concerns
RVNL’s executing project progress is often affected by delays in securing the required approvals for plans, land acquisition, and timely clearance of permissions from various government departments. Delays in obtaining approvals from the Ministry of Environment and Forests are particularly concerning. These challenges represent significant areas of concern in project execution for the Company. Moreover, RVNL has yet to be designated as a Zonal Railway, which consequently deprives it of the authority to approve drawings, designs, and other essential aspects. This lack of authorization remains a major cause of concern for the company.
Outlook
Indian Railways is widely regarded as the nation’s lifeline, catering to both passenger and cargo transportation requirements. It connects the length and breadth of the country, ensuring transportation access even to the most remote areas. This extensive connectivity plays a vital role in integrating diverse regions and populations.
Moreover, Indian Railways provide a cost-effective mode of transportation compared to alternatives such as air travel or road transport. Hence, to ensure the provision of optimal service to passengers and freight transport, there exists an urgent need to invest in railway infrastructure. This investment is essential to expand the network and renovation of existing network across the country. With RVNL’s prominent position as a leading provider of diverse rail infrastructure solutions, the company is poised to capitalize on outstanding opportunities arising in the industry.
RVNL can play a significant role in raising extra-budgetary resources for project execution as this is a specific mandate of the Company. By leveraging its experience in implementing projects in the Public-Private Partnership (PPP) mode, RVNL is well-equipped to explore and capitalize on such opportunities, going forward.
Sector: Industrials
Market Price: Rs. 270.60 as on today
FV: Rs 10/-
Stock Name: Rail Vikas Nigam Ltd
BSE Code: 542649, NSE Code: RVNL
Market Cap.: Rs 59235 Cr.
Book Value: Rs. 38
Segment: Civil Construction & Engineering
Incorporation: 2003
Headquarters: New Delhi
