The manufacturer of railway freight wagons, brake disc, castings and other mobility solutions Jupiter Wagons CFO Sanjiv Keshri says the next three to five years are very positive for the wagon industry.
“Considering our share of 12,000 wagons from the new tender of Indian Railways and additional order book of around Rs 4,000 to Rs 5,000 crore including the private side, we have clear visibility of revenue for the next three and a half years,” he told ETCFO.
After a period of slow growth, the wagon industry has experienced a revival, he said. As the company is booked for the next two years in terms of its order book, the next set of challenges are on the execution side, he added.
The board of the Kolkata-headquartered firm Jupiter Wagons last month approved a Qualified Institutional Placement (QIP) of Rs 700 crore. Keshri shared the plans to utilise the QIP proceeds and spoke about the plans to enter the EV market with electric commercial vehicles in early 2024.
In the June 2023 quarter, the company reported a 217% year-on-year jump in its EBITDA at Rs 99.56 crore. It delivered growth of 374% in PAT on a YoY basis. Edited Excerpts.
Q: The company recently got the board approval for raising Rs 700 crore through QIP. How are you planning to utilise it?
Sanjiv Keshri: This would be used in the expansion of the plant’s capacity. As the foundry casting facility is in West Bengal, and the Jabalpur plant has a fabrication unit, all the requirements of casting components are transported from West Bengal to the Jabalpur plant.
Now we are planning to get the Jabalpur plant as independent integrated wagon manufacturing with a new foundry casting facility. This is the purpose of the new capex to make Jabalpur plant an independent facility within 12 to 15 months. This will boost our margins in the coming quarters.Sanjiv Keshri, CFO, Jupiter Wagons
Q: How much EBITDA would this (Jabalpur plant) increase?
Sanjiv Keshri: While it’s too early to speak on this, however, the estimated increase would be 50 to 100 basis points.
Q: Indian Railways plans to procure 60,000 freight wagons worth Rs 25,000 crore this year. How do you see this panning out for Jupiter Wagons?
Sanjiv Keshri: The government is coming with this new 50,000-55,000 wagons tender which they may require within 18 months. In the industry today, with 25% market share we are one of the top three. Therefore, we expect to get around 10,000 to 12,500 wagons in this tender.
So, there’s a great opportunity we are looking at and today we have a good order book considering our pace. Currently, we are totally booked for the next two years. And with this tender, we see visibility of another one and a half years.
Q: In terms of revenue and orders, how much do you expect to close by the end of the current financial year?
Sanjiv Keshri: On the order book side, there is 50% demand from the private sector as well. Considering our share of 12,000 wagons from the new tender of Indian Railway and the additional order book of around Rs 4,000 to Rs 5,000 crore, including the private side, we have clear visibility of revenue for the next three and a half years.
Last quarter we gave a result of around Rs 750 crore, that much order we are adding every quarter. If you see our last four quarters order book, it is getting increased by Rs 100 or 200 crore from the previous quarters. We expect to maintain the pace of our execution in the coming quarters also.
Q: The industry has seen a boost with Indian Railways’ focus on freight. How are you looking at this boost? How are you planning to maintain this?
Sanjiv Keshri:In the past, the Indian wagon industry had ups and downs, but since 2021 the government’s focus has shifted. Earlier there was a plan but fund allocation and execution were a challenge, and we have overcome that now.
At the back of this, our focus is on execution, we are ramping up our production and considering the future — three to four years requirement, doing a regular capex. Last year, in March we delivered around 4,200 wagons, on an average of 350 to 400 wagons per month. Comparatively in the last two quarters, we delivered around 600 wagons per month. So the three-digit growth is seen on the revenue side, and performance also increased.
Q: Is Jupiter Wagon ready for this kind of growth?
Sanjiv Keshri: Yes, as we are doing regular capex, the focus is on wagons. We are betting big on backward integration as the brake disc production is in full swing, the brake system manufacturing plant is ready and we are participating in tenders and getting orders.
Q: What is the long-term capex strategy for the company?
We have a plan for the next 12 to 18 months timeline and considering the backward integration, organic and inorganic growth we have around Rs 1,200 crore to Rs 1,400 crore capex plan. The capex will be utilised in the expansion that we are looking for in terms of a foundry casting facility in Jabalpur, to increase the capacity of the wagon fabrication plant and some capex will be used to increase the capacity of the brake business.Sanjiv Keshri, CFO, Jupiter Wagons
Q: How much EBITDA margins are you expecting to maintain by FY24?
Sanjiv Keshri: Last year and Q1 we maintained around 12 to 13%, so the same is expected. This will be on the basis of an increase in efficiency and a reduction the transportation costs.
Q: The company has announced its entry into the EV commercial vehicle space. What specific opportunities are coming in the EV space? How much do you plan to invest to grow in the EV space in the next one to two years?
Sanjiv Keshri: Our eLCV (electric light commercial vehicle) will be used for end-mile connectivity, we have launched two vehicles in January Auto Expo. Currently, under this segment, six lakh internal-combustion (IC) engine CVs are required in a year. We are looking at 5 per cent to 10 per cent penetration of the total requirement.
Initially, the capex allocated is around Rs 50 crore investment in our subsidiary which is electric mobility. In the initial year, we are looking at 5,000-6,000 vehicles to sell. As this is a new business there is a huge opportunity, we will expand the capacity after the market response.Sanjiv Keshri, CFO, Jupiter Wagons
Q: What are the challenges of doing business in today’s time?
Sanjiv Keshri: With the current order book, we have two years of clear visibility, the only challenge that I foresee is on the part of execution. The other challenge is majorly in the part that next year the elections will happen, that may have disruptions for a few months.
