Texmaco Rail & Engineering Ltd:Annual Report 2023-24 Analysis

Texmaco Rail & Engineering Ltd.: A Comprehensive Overview #

About the Company #

Texmaco Rail & Engineering Ltd. is a diversified engineering conglomerate primarily focused on railway infrastructure, manufacturing rolling stock, and providing engineering solutions.

• Year of Establishment and Founding History: Texmaco Rail & Engineering Ltd. has a rich history dating back to the pre-independence era. The company was established in 1939.
• Headquarters Location: Kolkata, West Bengal, India.
• Company Vision and Mission: While the exact publicly stated vision and mission may vary over time, Texmaco’s focus generally lies in becoming a leading infrastructure and engineering solutions provider, committed to innovation, quality, and customer satisfaction.
• Key Milestones in Their Growth Journey:
  • Early focus on railway wagons and related equipment.
  • Expansion into steel castings, hydro-mechanical equipment, and other engineering segments.
  • Strategic acquisitions to broaden product portfolio and market reach.
  • Modernization of manufacturing facilities to enhance production efficiency.
• Stock Exchange Listing Details and Market Capitalization: Listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India. (Check current market capitalization on respective exchange websites)
• Management Team and Leadership Structure: The company is led by a board of directors and a team of experienced professionals in various functional areas like manufacturing, finance, and marketing.

Their Products #

Texmaco Rail & Engineering Ltd. boasts a diverse product portfolio catering to the railway sector and beyond.

• Complete Product Portfolio with Categories:
  • Railway Freight Cars: Wagons for various commodities (coal, cement, iron ore, containers, etc.)
  • Steel Castings: For railway and other industrial applications.
  • Hydro-Mechanical Equipment: Gates and other equipment for irrigation and water management.
  • Locomotive Components: Key parts used in manufacturing of railway engines
  • EMU/Metro Coaches: Manufacturing railway coaches to be used for intercity travel.
• Manufacturing Facilities and Production Capacity: The company operates multiple manufacturing facilities across India, each specializing in specific product lines.
• Quality Certifications and Standards: Texmaco adheres to stringent quality standards and certifications, including ISO 9001, ISO 14001, and OHSAS 18001.

Primary Customers #

Texmaco serves a wide range of customers primarily in the railway and infrastructure sectors.

• Target Industries and Sectors: Railways, infrastructure, steel, power, and irrigation.
• Geographic Markets (domestic vs. international): Primarily focused on the Indian domestic market, but also exports to select international markets.
• Major Client Segments:
  • Indian Railways.
  • Private sector companies in logistics, mining, and infrastructure.
  • Government agencies involved in water management and irrigation.

Future Outlook #

Texmaco Rail & Engineering Ltd. is poised for continued growth, driven by government infrastructure spending and private sector investments.

• Expansion Plans or Growth Strategy: Focus on increasing manufacturing capacity, developing new products, and expanding into new markets.
• Industry Trends Affecting Their Business: Government focus on railway infrastructure development, increasing demand for freight transportation, and growing urbanization.
• Long-term Vision and Strategic Goals: To become a leading global player in the railway infrastructure and engineering solutions space.

Financial Analysis: Texmaco Rail & Engineering Limited (FY2023-24) #

Comprehensive Performance Overview (FY2023-24) #

Texmaco Rail & Engineering Limited (Texmaco) reported significant improvement in financial performance for the fiscal year ending March 31, 2024. Revenue from Operations reached ₹3,502.87 crore, a substantial increase from ₹2,243.28 crore in FY23. Profit Before Tax (PBT) stood at ₹1,787.0 lakhs, markedly higher than the ₹270.0 lakhs reported in the previous fiscal year. Consequently, Profit After Tax (PAT) improved to ₹1,126.9 lakhs from ₹187.3 lakhs in FY23. The Board has recommended a dividend of 50% (₹0.50 per equity share of ₹1 face value). The company’s turnover for the year was ₹34,886.4 million. This performance was attributed to surging railway capital expenditure, robust wagon ordering, and an improved net cash balance sheet enhancing execution and margins.

Three-Year Financial Trend Analysis (FY22-FY24) #

Business Segment Performance (FY24) #

Freight Car Division #

• Order Book (as of April 1, 2024): ₹5,44,967 lakhs.
• Wagons Delivered (FY24): 7,028 units (4,969 IR; 2,059 private/export).
• Value of Deliveries (FY24): ~₹2,53,408 lakhs (₹1,68,855 lakhs IR; ₹84,552 lakhs private/export).
• Secured new contract for 3,400 BOXNS wagons and 519 BOBRN wagons.
• Exports: 25 tank wagons to Cameroon, 50 gondola wagons to Liberia.
• JV with NYMWAG CS a.s. for wagon and component manufacturing, targeting domestic and European markets.
• New Business: Upgrading Railway Crossing business to complete Railway Turnout System via technical collaboration with Sampyo Rail, South Korea.

Steel Foundry Unit #

• Operating at full capacity (48,000 MT total capacity).
• Largest Indian Railway casting foundry capacity in India; significant exporter.
• Successfully shipped first consignment of GET castings to Bradken, Australia.
• Planning expansion at Paradeep, Odisha, for mining and railway segments.
• New SBU formed for Railway component business (bogies, passenger rolling stock parts, metro rail components).

Infra - Rail & Green Energy Division #

Kalindee Unit #

• Gross Revenue (FY24): ₹44,703 lakhs (FY23: ₹54,028 lakhs).
• Order Book (as of April 1, 2024): ₹69,392 lakhs.
• Focus on S&T and Ballast-less track work. Key contractor for East-West Metro Corridor, Kolkata.

HME/BSD Unit #

• Turnover (FY24): ₹8,738 lakhs.
• Order Book (as of April 1, 2024): ₹7,381 lakhs.
• Near completion of Subansiri (90%) and Mizoram Bridge (98%) projects.

Infra-Electrical Division #

• Order Book (as of April 1, 2024): ₹1,13,205 lakhs (Order book grew ~4x over FY23).
• Diversifying into Transmission and Distribution (orders from Maharashtra & Madhya Pradesh utilities).
• Secured orders in 2 x 25 UV traction (OHE & Substations).

Joint Ventures #

Touax Texmaco Railcar Leasing Private Limited #

• Fleet strength: 27 rakes (all leased for 10-14 years).
• Inquiries for ~50 new rakes.
• Revenue from Operation (FY24): ₹5,960 lakhs.

Wabtec Texmaco Rail Private Limited #

• Total Income (FY24): ₹9,937 lakhs (29% increase YoY).

Detailed Analysis #

Balance Sheet Analysis #

Operating Performance #

Income Statement #

Cash Flow and Liquidity Analysis of Texmaco Rail & Engineering Limited (FY 2023-24) #

Cash Flow Analysis (Standalone & Consolidated FY24) #

Operating Cash Flow (OCF) #

Standalone: #

Net cash generated from operating activities before exceptional items was ₹9,004.20 lakhs. This was derived from Profit Before Taxation & Exceptional Items of ₹17,870.17 lakhs, adjusted for non-cash/non-operating items like depreciation & amortization (₹3,518.05 lakhs), finance costs (₹13,140.18 lakhs), interest received (₹(3,137.25) lakhs), and changes in working capital.

Key Performance Indicators #

Texmaco Rail & Engineering Limited - FY2023-24 Financial Analysis #

Revenue and Profitability Metrics (Standalone Basis, ₹ in Lakhs) #

Risk Assessment and Framework #

Comprehensive Risk Assessment #

Strategic Direction #

Strategic and Management Analysis #

ESG Framework #

ESG and Sustainability Analysis #

Texmaco Rail & Engineering Limited (TEXRAIL) Financial Analysis: FY24 #

Financial Performance (FY24 vs FY23) #

Texmaco Rail & Engineering Limited reported a significant improvement in its financial performance for FY24 compared to FY23.

• Revenue from Operations: Increased to ₹3,50,287.01 lakhs in FY24 from ₹2,24,327.74 lakhs in FY23, a growth of approximately 56.15%.
• Profitability:
  • Operating Profit (PBIDT): Stood at ₹28,952 lakhs in FY24, a substantial increase from ₹13,938 lakhs in FY23.
  • Profit Before Tax (PBT): Reached ₹17,870 lakhs in FY24, a marked improvement from ₹2,529 lakhs in FY23.
  • Profit After Tax (PAT): Rose significantly to ₹11,269 lakhs in FY24 from ₹1,970 lakhs in FY23.
• Margins:
  • Net Profit Margin (Standalone): Improved to 3.22% in FY24 from 0.88% in FY23.
  • Operating Profit Margin (Standalone): Increased to 8.27% (PBIDT/Revenue) in FY24 from 6.21% in FY23.
• Earnings Per Share (EPS) (Standalone, Face Value ₹1):
  • Basic EPS: Increased to ₹3.27 in FY24 from ₹0.61 in FY23.
  • Diluted EPS: Increased to ₹3.27 in FY24 from ₹0.61 in FY23.
• Dividend: The Board has recommended a dividend of 50% (₹0.50 per equity share of ₹1 each) for FY24, a significant increase from 15% (₹0.15 per equity share) in FY23.
• Return on Equity (Standalone): Improved to 5.88% in FY24 from 1.48% in FY23.
• Return on Capital Employed (Standalone): Increased to 8.00% in FY24 from 4.23% in FY23.
• Debt-Equity Ratio (Standalone): Improved significantly to 0.26 times in FY24 from 0.73 times in FY23.
• Interest Coverage Ratio (Standalone): While the specific calculation method in the report shows 1.3 times for FY24 vs. FY23, the substantial increase in PBT relative to finance costs (₹17,870 lakhs PBT vs ₹13,195 lakhs finance costs) suggests an improved ability to service interest payments.

Analysis: The financial performance in FY24 demonstrates a strong recovery and growth phase for the Company. The substantial increase in revenue and a more than proportional increase in profitability indicate improved operational efficiency, better capacity utilization, and potentially favorable market conditions. The significant reduction in the debt-equity ratio points to a strengthened balance sheet.

Capital Structure and Financing Activities #

• Equity Infusion:
  • Qualified Institutions Placement (QIP): The Company raised approximately ₹1000 crore through QIP in two tranches by issuing 5,80,90,000 equity shares at ₹129.11 and 1,61,29,032 equity shares at ₹155. This was oversubscribed.
  • Preferential Allotment: Raised approximately ₹50 crore by allotting 33,78,375 equity shares at ₹145 each to the Promoter and Promoter group.
  • Utilization of Funds: The proceeds are being utilized for retiring high-cost debt, funding capital expenditure, working capital, and general corporate purposes.
• Convertible Warrants: The Board approved a preferential issue of up to 83,40,000 convertible warrants to raise up to ₹150 crore. As of April 12, 2024, 77,72,020 warrants were allotted at ₹193 per warrant, with 25% consideration received.
• Impact on Share Capital: Paid-up share capital increased from ₹32,18,69,895 as of March 31, 2023, to ₹39,94,67,302 as of March 31, 2024.
• Credit Rating: Upgraded from ‘CARE BBB+’ to ‘CARE A-’ by CARE Ratings.

Analysis: The Company has proactively strengthened its capital base through significant equity infusion. This has reduced debt, improved liquidity, and provided resources for future growth initiatives. The successful QIP and promoter participation underscore market confidence.

Divisional Performance and Strategic Initiatives #

• Freight Car Division:
  • Order book as of April 1, 2024: ₹5,44,967 lakhs.
  • FY24 Deliveries: 7,028 wagons (4,969 for Indian Railways, 2,059 for private/export).
  • Strategic JV: 51:49 JV with NYMWAG CS a.s. (AZC Group) to produce wagons for domestic and eventually European markets.
• Steel Foundry Unit:
  • Operating at full capacity.
  • Largest Indian Railway casting foundry capacity in India (48,000 MT).
  • New Business: Upgrading Railway Crossing business to complete Railway Turnout System via technical collaboration with Sampyo Rail, South Korea.
  • Expansion: Planning to expand steel foundry at Paradeep, Odisha, for mining and railway segments.
  • ESG: Equity partnership with Ampin Energy Transition Pvt. Ltd. for a 10 MW solar power project in Chhattisgarh.
• Infra Rail & Green Energy Division:
  • Demerger: Announced demerger of this division (w.e.f. April 1, 2024) into a separate company (‘M/s Belgharia Engineering Udyog Private Limited’).
  • Kalindee Unit: Gross revenue of ₹44,703 lakhs in FY24. Order book as of April 1, 2024: ₹69,392 lakhs.
  • HME/BSD Unit: Turnover of ₹8,738 lakhs in FY24. Order book as of April 1, 2024: ₹7,381 lakhs.
• Infra-Electrical Division:
  • Diversifying into Transmission and Distribution.
  • Order book as of April 1, 2024: ₹1,13,205 lakhs.
• Passenger Mobility Foray: Acquired 51% of Saira Asia Interiors, a railway interiors company.
• Joint Ventures:
  • Touax Texmaco Railcar Leasing Private Limited: Fleet of 27 rakes (10 added in FY24), all leased. Revenue from operation: ₹5,960 lakhs.
  • Wabtec Texmaco Rail Private Limited: FY24 income up 29% to ₹9,937 lakhs, PBT up 23% to ₹1,839 lakhs. Order book as of April 1, 2024: ₹6,000 lakhs.

Analysis: The Company is pursuing a multi-pronged strategy involving organic growth in core segments, diversification, strategic partnerships, and restructuring. The robust order book across divisions provides good revenue visibility. The demerger is a key strategic move to de-risk the core business.

Industry Outlook and Company Positioning #

• Macroeconomic Environment: India is projected to be the fastest-growing major economy (IMF).
• Indian Railways:
  • Record freight loading of 1588 MT in FY24, targeting 3000 MT by 2030.
  • Budgetary allocation of ₹2,52,200 crore for capex in FY24.
  • Emphasis on increasing modal share of rail in freight.
  • Announcement of three major economic railway corridor programs.
• Company Positioning:
  • Well-positioned to capitalize on railway capex and wagon ordering.
  • Strong focus on exports.
  • Leveraging R&D for next-generation freight cars and components.

Analysis: The strong government focus on railway infrastructure development and increasing freight movement by rail provides a very favorable long-term outlook for the Company. Texmaco appears well-equipped to benefit from these trends, both domestically and in export markets.

Key Risks and Mitigants #

• Management Identified Risks (MD&A):
  • Volatility and working capital requirements of EPC business: Being addressed by the proposed demerger of the Infra Rail & Green Energy Division.
  • Execution Risk in Large Orders: Managing very large orders requires robust execution capabilities.
• Key Audit Matters (Auditor’s Report - Standalone & Consolidated):
  • Revenue Recognition for long-term projects: Significant judgments are involved in using the percentage of completion method.
  • Contingent Liabilities (Tax Litigations): The Company has pending tax litigations amounting to ₹20,582.07 lakhs (Consolidated) / ₹20,504.45 lakhs (Standalone).
• Forward-Looking Statements Disclaimer: The annual report contains forward-looking statements subject to assumptions and risks; actual results could differ.

Analysis: The demerger strategy mitigates a key business risk. Revenue recognition in long-term contracts and contingent liabilities from tax disputes remain areas requiring careful monitoring and management judgment.

Corporate Governance and Shareholder Matters (AGM Notice) #

• The 26th AGM is scheduled for September 25, 2024, via VC/OAVM.
• Ordinary Business:
  1. Adoption of Audited Financial Statements (Standalone & Consolidated) for FY24.
  2. Declaration of dividend for FY24 (proposed ₹0.50 per share).
  3. Re-appointment of Mr. Akshay Poddar as Director.
  4. Re-appointment of Mr. Ashok Kumar Vijay as Director.
• Special Business (Ordinary Resolution): 5. Ratification of remuneration of ₹2,50,000 plus taxes to M/s. DGM & Associates, Cost Accountants, for FY25.
• Auditor’s Opinion: The auditors (L. B. Jha & Co.) expressed an unqualified opinion that the financial statements give a true and fair view.

Financial Analysis Report: Texmaco Rail & Engineering Limited (FY Ended March 31, 2024) #

Auditor’s Opinion and Qualifications #

• Standalone Financial Statements: L. B. Jha & Co. issued an unqualified opinion, stating that the standalone financial statements give a true and fair view of the Company’s state of affairs as of March 31, 2024, and its profit, changes in equity, and cash flows for the year then ended, in conformity with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.
• Consolidated Financial Statements: L. B. Jha & Co. also issued an unqualified opinion on the consolidated financial statements, stating that they give a true and fair view of the consolidated state of affairs of the Group, its consolidated profit, consolidated changes in equity, and its consolidated cash flows. The audit of one subsidiary and two jointly controlled entities was conducted by other auditors, and the opinion on the consolidated financial statements, insofar as it relates to these entities, is based solely on the reports of such other auditors.
• Key Audit Matters (KAMs):
  • Revenue Recognition for long-term projects: Significant judgments are required regarding progress, costs to complete, and potential onerous obligations due to the nature of long-term engineering, procurement, and construction (EPC) contracts and the use of the percentage of completion method.
  • Contingent Liabilities (Tax Litigations): Assessing the probability of economic outflow and determining provisions or disclosures under Ind AS 37 involves significant management judgment due to significant pending tax litigations (₹20,582.07 lakhs as per consolidated KAM disclosure).

Key Accounting Policies #

• Basis of Accounting: Financial statements are prepared on a historical cost basis, except for certain financial instruments and defined benefit plans measured at fair value. The functional currency is Indian Rupees. The operating cycle is ascertained as 12 months.
• Revenue Recognition:
  • Sale of Goods: Recognized when significant risks and rewards of ownership are transferred, and the amount can be reliably measured.
  • Construction Contracts (Ind AS 115): Recognized over time by measuring progress towards complete satisfaction of performance obligation, based on the proportion of actual cost incurred to date to total estimated cost. This involves significant judgment. Variable consideration is included when reasonably estimable and reversal is improbable.
• Property, Plant & Equipment (PPE): Carried at cost less accumulated depreciation. Depreciation is on a straight-line basis as per Schedule II of the Companies Act, 2013, except for certain assets where useful life is based on technical expert reports. Assets costing ₹5,000 or less are fully depreciated in the year of addition.
• Intangible Assets: Recorded at cost less accumulated amortization (Straight Line Basis, generally over 6 years).
• Financial Instruments: Recognized at fair value on initial recognition. Subsequently measured at amortized cost, Fair Value Through Other Comprehensive Income (FVTOCI), or Fair Value Through Profit or Loss (FVTPL) based on classification. Impairment is assessed based on Expected Credit Losses.
• Inventories: Valued at the lower of cost (weighted average basis) and net realizable value.
• Leases (Ind AS 116): Right-of-use assets are recognized at the commencement date and depreciated. Lease liabilities are measured at the present value of lease payments.
• Employee Benefits: Defined contribution plans (e.g., Provident Fund) are expensed as incurred. Defined benefit plans (e.g., Gratuity) are accounted for based on actuarial valuations using the projected unit credit method, with remeasurements recognized in OCI.
• Taxation: Current tax is based on taxable profit. Deferred tax is recognized using the balance sheet approach for temporary differences. MAT credit is recognized as a deferred tax asset.
• Changes in Accounting Policies: No significant changes in accounting policies due to new mandatory standards in FY24. Policies appear to be consistently applied.

Internal Control Effectiveness #

• Auditor’s Report on Internal Financial Controls (IFC):
  • Standalone: L. B. Jha & Co. opined that the Company has, in all material respects, an adequate internal financial controls system over financial reporting, and such internal financial controls over financial reporting were operating effectively as at 31 March 2024.
  • Consolidated: A similar unqualified opinion was issued for the Group, its subsidiary companies, and jointly controlled entities incorporated in India, based on their audit and reports of other auditors for certain entities.
• Specific Observation by Auditors (Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 for Standalone, and Rule 11(vi) for Consolidated):
  • The Company (and its Indian subsidiaries/JVs) used accounting software that, for the Holding Company and most subsidiaries/JVs, did not have a feature of recording an audit trail (edit log) facility. However, the auditors noted management’s representation that the software does not allow editing or deletion of transactions, thus transactions cannot be tampered with.
  • One jointly controlled entity’s auditor (not L.B. Jha & Co.) reported that while their software had an audit trail feature, it was not enabled/operated for a brief period (April 1, 2023, to April 10, 2023).
  • The auditors state that reporting on the preservation of audit trail as per statutory requirements is not applicable for FY ended March 31, 2024, as the proviso to Rule 3(1) of Companies (Accounts) Rules, 2014 is applicable from April 1, 2023.
• Management Responsibility: The Board of Directors is responsible for establishing and maintaining adequate IFC.
• Audit Committee Review: The Audit Committee periodically reviews the internal control system.

Regulatory Compliance Status #

• General Compliance: The Secretarial Audit Report confirms that the Company has generally complied with the provisions of the Companies Act, 2013, SCRA, Depositories Act, FEMA (to the extent applicable), SEBI regulations (including Takeover Code, Insider Trading, ICDR), and other specific laws like the Factories Act and Environment Protection Act. Compliance with Secretarial Standards and SEBI Listing Obligations and Disclosure Requirements (LODR) is also affirmed.
• Past Non-compliance: The Corporate Governance report mentions a fine levied by BSE & NSE for a delay in the appointment of Independent Directors during FY21 due to COVID-19.