rail budget pdf

8/2/2019 Rail Budget PDF

1/6Emkay Global Financial Services Ltd 1

Rs bnFY11(Act.)

FY12BE FY12RE % YoY FY13BE % YoY

Gross traffic earnings 945.4 1062.4 1039 9.9 1326 27.6

Expense & Appropriation

Ordinary working exp 681.4 736.5 756.5 11.0 844.0 11.6

Railway depreciation 55.2 70.0 61.6 11.7 95.0 54.2

Railway pension fund 158.2 158.0 168.0 6.2 185.0 10.1

Miscellaneous Expenditure 8

Total 895 964.5 986.1 10.2 1124 14.0

Net earnings 63 120 71 12.6 222 211.2

Dividend 49.4 67.4 57 14.3 67 18.2

Excess/Surplus 14 53 15 6.4 156 941.0

Railway Development Fund

Railway Capital Fund

Plan outlay (investments) 407.92 576.3 495 21.3 601.0 21.5

Operating rates (%) 94.6% 91.1% 95.0% 84.9%

Margin 5.4 8.9 5.0 15.1

A: Actual; RE: Revised Estimates; BE: Budget

March 14, 2012

RailwayBudget

Indian Railway Budget 2012-13

Ambitious agenda

Rai l budget set s ambi t ious target s for FY13 (revenue) and

4x increase in cap i ta l ou t lay 12 th f ive year p lan t o Rs7350bn.

A ims t o ach ieve sharp improvement in opera t ing ra t io FY13E h igh l ights (1) Gross Traf f ic Receipts at Rs1.3tn

(+28%) (2) Operat ing Rati o at 84.9% (+1010 bps) and (3)

capi t a l out lay at Rs 601bn (up 21%)

Target ing operat ing rat io t o 74% by FY17 v/s 95% in FY12.

This is s ign i f icant ly h igher t han avg. o f 93% (FY09-FY12).

Budget is benchm arking rat io to best year ever of 1963-64

Sharp f re ight ra te h ik e (on 6t h march) w i l l be negat ive fo r

secto r re ly ing ra i lw ay fo r t ranspor ta t ion . Mixed budget fo r

ra i lway re lated s tock s

Rail budget announced today is an combination of tighter allocation, expectedimprovement in operating ratio (at 85% from 95% in FY12) aided by increase in freight

rates (passenger fare following the cargo freight hiked last week) translating into

modest rise in GoIs fiscal support to the rail budget (Rs 240bn) and lower market

borrowing (Rs 165bn).

Non-Populist Reflection of tight financial condition

The rail budget can be considered non-populist and is a reflection of the intensely tight

fiscal conditions facing the governments in general and declining profits of the railway

department. The later is reflected in the fact that the passenger fare hike (10% to 12%)

has happened after a long gap of 8 years.

FY13E gross traffic receipts growth expected at 27.6% to Rs 1.3tnRailways expects gross traffic earnings to increase sharply by 28% to Rs1,254 bn in

FY13E, driven by (1) 25.2% growth in passenger earnings to Rs360.7 bn aided by

10-12% increase in fares and 5.4% growth in passenger traffic and (2) 30.2% increase

in freight earnings to Rs893.4 bn. Sharp increase in freight earnings will in turn be led

by (1) 5.6% increase in freight loading to 1025 MT and (2) 20-32% increase in freight

rates (effected from 6 Mar12). We believe that the gross traffic receipts targets are

optimistic and expect disappointment.


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Indian Railway Budget 2012-13 Railway Budget

Emkay Research 14 March 2012 2

Rail freight expected to grow by 5.6% to 1025 MT, seems optimistic

Freight traffic movement expected to grow by 5.6% to 1025 MT over 970 MT in FY12P

(revised estimates). Growth in rail freight expected to be driven by (1) strong growth in

domestic coal production comprises about 50% of annual traffic (CILs production

expected to grow by 6.4%) and (2) healthy growth across product categories

Rail freight expected to grow by 5.7% to 1025 MT in FY13E

474

493

519

557

602

667

728

794

833

888

926

993

970

1,0

25

7.5%8.0%

10.7%

9.1%

5.0%

6.6%

4.3%

7.2%

4.7%

5.7%

5.3%

4.0%

9.2%

0

200

400

600

800

1000

1200

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012(BE)

2012(RE)

2013(BE)

MillionTonne

0%

2%

4%

6%

8%

10%

12%

(%)

Source: Indian Railway, Emkay Research

Composition of the Rail Freight

YoY growth (%)

Categories2010-11

Tonnage (Mn) 2011-12RE 2012-13BE 2011-12RE 2012-13BE

Coal 420.4 454.5 485 8.1 6.7

RMl to Steel Plants 13.3 14.6 15.25 9.8 4.5

Pig Iron & Fin. Steel 32.8 34.5 37 5.1 7.2

Iron Ore for Export 118.5 104.63 104 (11.7) (0.6)

Cement 99.1 108.84 118 9.9 8.4

Food Grains 43.5 46.1 49.75 6.1 7.9

Fertilizers 48.2 50.02 52 3.7 4.0

P.O.L 39.3 41.51 42 5.7 1.2

Container Service 37.6 38.3 42 1.9 9.7

Other Goods 69.2 77 80 11.4 3.9

Total 921.7 970 1025 5.2 5.7


Passenger fare hiked by a moderate 10-12%

After a hiatus of 8 years, railways increased passenger tariffs by 10-12% across the board.

We believe that the increase in passenger fares is moderate given the sharp increase in

operating costs (Fuel prices up 50% in the past 10 years) and prevalence of significant

cross subsidization from freight carriage.

Rail Category(In Paise/Km)

Existing rate Increase Increase (%)

Suburban trains 40 Ps 2 Ps 5%

Mails / Express trains NA 3 Ps NA

Sleeper class 41 Ps 5 Ps 12%

AC Chair, 3-Tier 110 Ps 10 Ps 9%

AC 2-Tier 150 Ps 15 Ps 10%

AC 3-Tier 252 Ps 30 Ps 12%



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12th

Plan perspective: Operating ratio of 74% by FY17E, an ambitious target

Step-up in investment in 12th

5-year plan is supported by steep improvement in operating

ratio to 74% by the terminal year. This is significantly higher than the average of 93% during

FY09-FY12, infact highest ever in last 25 years. Even during the best phase of economic

boom of FY04-FY08 during the average was around 82% and lowest was 77%. Clearly, the

Rail Minister is having an overambitious efficiency gains.

Aggressive assumption for improvement in operating ratio (%)

85.3

77 77.2

89

93.6 93.395.1

84.9

74.7

60

70

80

90

100

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-

12RE

2012-

13BE

2016-

17BE


Our observations

Increase in freight rates (effected on 6th March) negative for users of railways fortransport of goods

Land Allocation to Dedicated freight corridor will be beneficial for private operators andContainer depots like Concor & GDL

Railways budgeted procurement of 16,000 wagons in FY13E will benefit companieslike Texmaco, Titagarh Wagons

We expect the increase in plan outlay will benefit companies like - L&T, Microsystem,BEML, Kalindee Rail, ARSS Infra, Hindustan Rectifier

Dedicated freight corridor has not witnessed much action and the progress on landacquisition has been pretty ordinary at 6,500 hectares v/s and overall requirement of

105,000 hectares.

We believe the capital outlay although could have been higher considering the fact thatrailways has not been able to achieve their target expenditure in FY12E.

Key initiatives Key beneficiary companies

Outlay on expanding rail lines Rs 102.6bn (Rs 88bn in FY12) Kalindee Rail, BEML, Stone India etc

Procurement of 16000 wagons vs 18,000 units in FY12 Texmaco and Titagarh Wagons. However, overall pie has shrinked ascompared to FY12

Accelerating process for Dedicated rail freight corridor (DFC). Allocated6,800 acres of land parallel to the existing railway network for DFC

L&T, Simplex infra, Kalindee Rail with almost all the companies relatedwith Railway work

Railway Electrification Rs 8.2bn ARSS Infra, Kernex


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Break of Capital outlay and Key participants

Capital outlay

Rs bn FY11 FY12BE FY12RE % YoY FY13BE % YoY Companies which operate in the respective segment

Gauge conversion 32.3 27.8 26.6 -17.7 22.7 -14.6 Kalindee Rail, BEML, Stone India etc

Doubling 21.7 54.2 26.5 22.2 34.1 28.7 Kalindee Rail, BEML, Stone India etc

Rolling stock 147.1 141.2 158.9 8.0 184.9 16.4 BHEL, BEML, Titagarh, Texmaco, KalindeeLocomotives 57.2 52.2 59.0 3.1 71.4 21.0 BHEL, BEML

Carraiges 41.8 30.1 46.0 10.0 42.0 -8.6 Texmaco, Titagarh Wagons, BEML

Wagons 46.7 44.0 49.8 6.6 52.6 5.7 Texmaco, Titagarh Wagons, BEML

Cranes 0.0 13.3 0.0 14.5

Road safety works 110.1 200.0 165.7 50.5 200.0 20.7 Kernex Microsystem

Bridge works 3.5 3.3 3.4 -4.8 4.6 38.1 Construction contractors

Signalling and telecommunication 9.6 11.0 8.9 -7.4 20.1 124.6 Kalindee Rail,

Electrical works 9.3 12.7 11.1 19.9 13.4 20.3

Metropolitan transport 5.18 65.02 10.52 103.1 47.33 349.9 BEML, Alstom projects

Others 69.1 61.1 83.1 20.2 73.9 -11.1

Total Capital outlay 407.9 576.3 494.7 21.3 601.0 21.5


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Annexure

Profile of key railway companies

Company Brief Profile

Kernex

Involved in manufacturing, installing and maintaining of anti-collision systems

as well as conceptualizing, designing, and developing certain railway safetyand signal systems for Konkan Railways Corporation Ltd.

Kalindi RailManufacture and installation of signaling and telecommunication equipment

and execution of gauge conversion projects of the Indian Railways

Hind RectifiersManufactures of rectifier equipment, semi-conductor devices. Also, AC

electric locomotives and AC electrical multiple units for Railways.

BEML India Ltd. Manufactures Rail Coaches & Spare Parts and Mining Equipment

Stone IndiaManufacturers various equipment for the railways like alternators, air brakes

and brake regulators.

TexmacoManufactures Railway Freight Cars/Wagons, Hydro-Mechanical Equipment

for Mega Power Projects, Heavy Steel Structures and Process Equipment.

Titagarh Wagons

Manufactures railway wagons, Bailey bridges, Heavy Earth Moving and

Mining equipment, steel and SG iron castings of moderate to complex

configurations

ARSS InfraCompany undertakes construction of railway infrastructure, roads, bridges,

and irrigation projects.

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