Texmaco Rail seeks to reduce short-term debt to improve profitability
Texmaco Rail and Engineering (TexRail), led by Saroj Kumar Poddar, is reportedly looking to repay some of its high-cost short-term debt through a rights issue with the aim of improving profitability.
Speaking to Business Standard, Ashish Kumar Gupta, deputy managing director of TexRail, said the company will finalize the size and price of the rights issue before the end of September.
âWe have already announced a rights show, which will open very soon and could take place this month. The size and price of the rights issue would be finalized in the next few days and I think we should enter the market very soon, âGupta said.
TexRail occupies a dominant position in the supply of rolling stock for rail operations. Although the company has a healthy order book, it has faced headwinds due to high cost debt affecting its profitability. This lowered the company’s stock price on the stock exchanges, sabotaging a previous rights issue.
âWe would take high cost debt off the proceeds of this (new) rights issue. Total short term debt is currently around Rs 450 crore while long term debt is reportedly close to Rs 40 crore. We will try to repay part of the short-term debt through the issuance of rights. This can help pay off the loan faster because it will reduce interest expense, âhe added.
According to Gupta, TexRail had around Rs 100-105 crore of cash on hand in June 2021. The company’s consolidated order book is around Rs 3,400 crore.
Responding to questions about a possible turnaround, Gupta said, âWe are working to reduce interest charges and the toll issue will help us achieve that. This would improve the link between earnings before amortization and impairment of interest (EBIDTA) and earnings before tax (PBT). We are also working on a cost reduction program and have a consultant working with us on a long term cost reduction strategy.
Emphasizing the areas of intervention of the company, he said: âThere are a lot of rail tenders and we would participate. Our main area of ââintervention would be the laying of tracks. We are also interested in the upcoming metro projects.
Gupta said TexRail would not want to go into private rail operations, but instead manufacture engines or rolling stock for them.
TexRail would like a share of the privatization of other rail services whenever opportunities arise. âThe other thing that will interest us are services, such as track maintenance, when they open. This will require policy changes after which the railways can award long-term contracts. We are committed to EPC (engineering, procurement and construction) in the metro and high-speed segments, as well as signaling, which is our strong point. We are looking to expand into electrification, track laying and signaling, among others. We are also keen to enter the mechanized maintenance of the tracks and the manufacture of these machines, and we are preparing for them to take a step ahead of the competition, âsaid Gupta.
The company has no short-term plans for expanding its capacity, but would focus on improving capacity utilization. âThe whole industry is operating at around 20 to 50% of its capacity. We would not spend on expanding capacity, but on sustainability. We have investment plans to improve our environmental performance, reduce the carbon footprint and energy efficiency. We would also improve our design and development capabilities, âGupta said.