‘Rail’ Stocks Jump 5-12% on FDI Buzz
Shares of companies which depend on the Indian Railways for their income jumped 5-12% on Monday following news that the government is considering a proposal to allow foreign direct investment in railway.
Kernex Micro was leading the pack with gains of 12%, while Kalindee Rail jumped 10%. Stocks of other railway-related companies such as Texmaco Rail, Hind Rectifiers and Titagarh Wagon too edged up.
ET had reported on March 3 that the Department of Industrial Policy and Promotion (DIPP) will pitch in for FDI in railway before the dates for the general elections are announced. In fact, DIPP has put out a note to the Cabinet seeking approval to allow 100% FDI in railway infrastructure such as elevated rail corridor projects, freight terminals, suburban corridors, dedicated freight lines and highspeed train systems.
“Indian companies which manufacture equipment for Indian Railways will be immensely benefited if 100% FDI is allowed for railway infrastructure,” said LV Raju, MD for Kernex Microsystems.
“The biggest advantage for the Indian companies would be its saving on cost of funds, as we have been sourcing funds at 15-16% interest. After the implementation of FDI, cost of funds is likely to come down by 20-25%,” he added.
In fact, Kernex Micro had been in discussions with several global players for starting a venture. It has finalised talks with global players like Lalles for a 50:50 joint venture and will benefit a lot once FDI is allowed.
Indian Railways needs nearly . 5 lakh crore to bolster its level of infrastructure preparedness up to global standards, especially when it comes to issues of safety and speed. Given the current financial constraints, and not much coming from the central government, the Indian Railways depends heavily on foreign funds for expansion.
“India does not have an efficient rail or road network. We desperately need a good rail network for the transportation of goods and movement of our troops,” said Raju.
“Even Pakistan has a good balance between road and rail transport: passenger traffic had been largely focused on the road network while rail for haulage purpose,” he added.