In an interaction with Sanjiv Keshri, Chief Financial Officer of Jupiter Wagons Ltd

After a period of slow growth, the wagon industry has experienced a revival, primarily driven by the government's focus on infrastructure development and capacity expansion, states Sanjiv Keshri, Chief Financial Officer of Jupiter Wagons Ltd

In Q1FY24, the revenue surged by 155 per cent from last year’s same quarter, while the net profit of the company zoomed by 374 per cent from the corresponding quarter last year. What were the contributing factors to the company’s performance?

Jupiter Wagons has ramped up production more than 3 times from 526 wagons in Q1 FY23 to 1,713 wagons in Q1 FY24. The Company delivers on its guidance of 550-600 wagons production rate per month.

There has been an increase in value-added products and an improved product mix has aided the increase in revenue. The company has also commenced supplies of brake assemblies (JV) in Q4 FY23 which continued in Q1 FY24, further contributing to incremental rise in profits.

Another fact that stands out for JWL is that the Company has managed to ramp up production without compensating on the margins. JWL enjoys an industry-leading EBITDA margin of >13 per cent depicting superior execution skill.

The company has revised the guidance for monthly wagon production to 800 wagons per month by the end of FY24 & to reach a production rate of 1,000 wagons per month by the end of FY25.

Jupiter Wagons has entered the global freight wagon markets through a partnership with RITES and is now actively participating in tenders in Zimbabwe and Mozambique. Provide us with an overview of the motivations and objectives that drove this significant expansion. 

We anticipate strong global demand for rolling stock of freight wagons. Hence, we are positioning ourselves to capitalise on such demand opportunities. We have a wide variety of specialised and value-added products for different applications in freight movement. The backward integration at our facilities allows us to execute efficiently. That clearly indicates how well we are placed on the supply side.

Now on the demand side, we are primarily supplying wagons to Indian Railway and private customers in India. With this MoU, we will be diversifying our geographical presence as well as our customer segments which will serve to de-risk the business from a longer-term perspective.

Markets like Asia and Africa are the growth markets and it makes strategic sense for Jupiter Wagons to be better entrenched in both these markets.  

Can you share an overview of the company’s overall order book and execution?

Order book stood at Rs 6200 crore at the end of Q1 FY24 against Rs 5800 crore in the last quarter led by nearly 80 per cent of wagons ordered from the private players and 20 per cent from IR, out of the total order book 90 per cent for Wagons and rest for other products. These orders will be executed over a two years timeframe.

Congratulations on successfully raising Rs 125 crore through a QIP. Can you provide us with an overview of the key objectives and motivations behind this fundraising initiative?

The funds raised through QIP have been utilised for the acquisition of Stone India, working capital optimization and another corporate purpose thereby fuelling our growth.  

What is your outlook on the Indian railway sector for the next few quarters? 

The Indian Railway sector has seen substantial investments in areas such as rail tracks, Signalling systems, and terminals. These investments are geared toward expanding the overall capacity of the railway network.

While the development investments have been significant, the Indian Railways need to address the issue of wagon capacity to make the most of their planned infrastructure and ensure that DFC is a success.

The National Rail Plan forecasts that the required wagon fleet size will be around 5,50,000 units by 2031 and 10,00,000 units by 2051. This indicates an incremental demand of roughly 2.5 lakh units by 2031 and 7.5 lakh units by 2051. The current manufacturing capacity of wagon manufacturers in India is approximately 30,000 units per year.

In the fiscal year 2022-23, the Indian Railways plan to procure 90,000 wagons over 39 months, translating to around 30,000 wagons per year for the next three years. The railway sector is expected to launch multiple tenders, including a large global tender, in the next couple of months. These tenders are projected to require around 50,000 wagons in total. This move aims to optimize and consistently utilize the existing manufacturing capacity.

After a period of slow growth, the wagon industry has experienced a revival, primarily driven by the government's focus on infrastructure development and capacity expansion. Currently, approximately 20 to 30 per cent of the wagon order book consists of orders from the private sector. This trend is expected to continue over the next few years, sustaining momentum in the freight wagon business.