Ladies and gentlemen, good day and welcome to Titagarh Rail Systems Ltd Q1 FY26 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star ten zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Patel from MUFG Bank. Thank you, and over to you, sir.
Thank you, Palak. On behalf of Titagarh Rail Systems Ltd, I extend a very warm welcome to all the participants on Q1 FY26 Financial Results Discussion Call. Today on the call, we have Mr. Umesh Chowdhary, Vice Chairman and Managing Director, Mr. Prithish Chowdhary, Deputy Managing Director, and Mr. Saurav Singhania, Chief Financial Officer. Before we begin the call, I would like to give a short disclaimer. This call may contain some of the forward-looking statements, which are completely based upon our beliefs, expectations, and opinions as of today. These uncertainties are not a guarantee of our future performance and involve unforeseen risks and uncertainties. With this, I would like to hand over the call to Umesh sir. Over to you, sir.
Thank you, Parth, and a very good afternoon to everybody, and thank you very much for joining this earnings call of Q1 FY26. We have already shared both the press release along with the results yesterday, as well as the investor presentation, a lot of details, and we have tried to segmentalize the details this time, and we would intend to follow this format in periods to come to be able to give the complete picture of the progress of the different projects, but in a nutshell, I would like to say that as far as the overall company is concerned, there have been significant developments during the period. I had mentioned in the last call that our focus is going to be a lot on booking new orders.
I'm happy to share that the company was able to book orders worth almost INR 2,500 crores during this period, including GST, both some in the passenger rail segment as well as in the freight rail segment. This is a trend that we intend to continue. This is an effort that we will continue to pursue to build up a stronger order book to have a larger visibility both in the freight side and the passenger side. Apart from that, a very significant development during the period has been the acquisition of the land from West Bengal government. This was the land which was earlier a part of Hindustan Motors, which the government has resumed on account of the closure of their unit. This is contiguous to our existing passenger rail factory.
In fact, the only thing we had to do to take possession of the land once we were allotted was to break open the boundary wall. It is that contiguous with our existing facility. This enables us in many ways. One, of course, it helps us to expand capacity and to pursue backward integration in the same premises. But more than that, it enables us to create a comprehensive facility for testing and commissioning of rigs, including the modern rigs and probably in the future, high-speed rigs, which, as India is moving towards the high-speed trains and being a leader or emerging as a leader of the rolling stock, we would definitely also like to evaluate that opportunity in years to come.
So this will give us a test track of about 1.6km , a level test track, which is unique because that is not available with any of the private sector or coach manufacturers in India, and will be a huge advantage to us in years to come. So that is a very, very significant development because it's not very easy to get land contiguous to your existing factory. And of course, the promoters have infused INR 200 crores into the company or have committed to infuse INR 200 crores in the company against a preferential issue. And of course, all the other highlights have been given.
But on the challenges faced by the company, the severe challenge that has been shared also with the investors in the last quarter was the poor wheel set supply from the railways, which actually was quite a big setback for the company and for the industry as a whole. I'm happy to share over the last two, three weeks, the position has normalized, and we are getting adequate wheel sets now from the railways. But during the quarter, the production fell to almost 1,600 or more wagons, which was a significant drop over the earlier period or the corresponding period. The company is extremely confident. We are almost certain that we will be able to recover this loss of production and maintain volumes which are in line with what we did last year and also the EBITDA margins were in line with what we did last year.
So we don't see much of a concern on that as far as the full year is concerned. However, the biggest growth story, which we have also mentioned in our press release, is the passenger rail system. All the SBUs, and we have divided this time the disclosure on the different SBUs within the main business unit of passenger rail system. All the SBUs have actually started functioning, while the Vande Bharat revenue will start accumulating only next year. But all the other SBUs, which is the propulsion and electrical, as well as the metro, will start contributing in a meaningful manner within the current financial year. I think that, in a nutshell, sums up the overall picture. And of course, one very important development is also that the company has decided to focus on the core sector of its business, which is railway systems.
And we had announced that we had constituted a board committee to evaluate what we have to do for the shipbuilding, bridges, and defense business. So the board has decided to demerge the shipbuilding business into a wholly-owned subsidiary, which will then pursue its growth with or without induction of strategic or financial partners. But the idea is that to grow that business, which is also a very core sector of the government, the government has identified that as a core growth sector for the country. And considering that our company has all the credentials and is currently also delivering several vessels to the Indian Navy, has delivered vessels to the Coast Guard and National Institute of Ocean Technology and all of that, we believe that this is going to be a business that can grow significantly in its own accord.
But since there is not much synergy with our railway business, we would like to pursue it in a separate style and separate company. And the company intends to continue to focus on the railway business, which is both the passenger rail system and the freight rail system. For the signaling system, signaling and safety system, which is a subset of the passenger rail system, the company has participated in a few tenders and is also pursuing certain strategic partnership or tie-ups or technology tie-ups with certain international companies. But that will be folded into the overall business growth of the passenger rail system. So with that, I would conclude my opening remarks, and I'd be very happy to take any questions, any suggestions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Please note, ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference call, please limit your questions to two or three per participant. The first question is from the line of Vedant Sarda from Nirmal Bang Securities. Please go ahead.
Thank you for the opportunity. I just wanted to know our full year revenue guidance and our long-term revenue guidance for the company.
So we do not give any revenue guidance per se on the company long-term, but what we have mentioned in the guidance note that has been issued alongside with the result is the freight business of the company. We expect in the current year to remain in line with what we have done last year. So we do not expect any significant growth on the freight side. But on the passenger side, what we had done was 12 cars in metros and about 300 traction motors in the full year in the propulsion. And we are expecting this year to grow that 12 cars to 120 cars, which is a tenfold jump. And the propulsion system also, we are expecting to have a significant jump as we have already disclosed in our press note.
In terms of the long-term potential, the first phase expansion of our passenger coach plant will take this capacity to about which we expect to reach maybe in the next year or end of next financial year to about 50 cars per month between Vande Bharat and metros, subsequently increase to about 72 cars a month in another two to three quarters thereafter, and the long-term target for the passenger is to reach 100 cars per month, which we expect to reach in about three to four years' time, particularly with the acquisition of the new facility or the new asset that we have acquired. As far as the wagon is concerned, our capacity is now between the Kolkata unit and the Bharatpur unit is at about 1,000 to 1,200 wagons.
The current expected business volume that we expect should be in the vicinity of about 900-1,000 wagons per month till the new power plants, which have been planned, come up or the substantive growth in the railway freight revenue goes, which we expect also should happen once the overall CapEx of the railways develops and all the BFCs start operations. Till that time, we expect that we will be able to maintain the current run rate of between ±900 something.
Okay, sir. Thank you so much.
Thank you, sir. The next question is from the line of Amay Sharda from Purnartha Investment Advisory Private Limited. Please go ahead.
Hi, sir. Thank you for the opportunity. So the first question was regarding the wheel set issue that we have faced. You said that it has been resolved. So from August onwards, can we expect 900-1,000 wagons per month volume that you have guided?
So the wheel set problem has been resolved, in fact, from the last week of July, first week of August. And there is a lot of static. If you can kindly go on mute, that will be easier.
Yeah, yeah. Sure. Just a sec.
Yeah. So we expect to now produce in the vicinity of 900 wagons a year. As we've given in the press note, we would be able to reach the same numbers or maybe make a marginal improvement over last year. And in order to do that, we should be producing in a ballpark of 900 wagons, plus minus 50 wagons every month. And we are confident of being able to do that.
Okay. Thank you for that, sir. And the second question was regarding the margins in the passenger wagon segment. So is it so that the margin for propulsion is better than the margin for cars or nothing like that?
No, propulsion is a higher margin business, sir. We've always maintained that propulsion is a higher margin business. But of course, right now, it's in a nascent stage. As I've always explained, that it is only the operational leverage that's not available. Once we start delivering a certain volume, then the margins that we should be able to get in both operations as well as services should be significantly more than what we should be able to get in the rolling stock.
Okay. And for this 120 metro cars target that we have, out of that, will it be possible to bifurcate how much will be for Bangalore Metro and how much for Gujarat Metro?
We would not be able to do that for competitive reasons. But in terms of the overall numbers, because that is very important in the current phase of the company, what is important is to see the ramp-up. And if we are able to do, which we are very, very hopeful and confident of being able to do 120 cars, that in itself, with the Mumbai line having come and with the Gujarat Metro and the Vande Bharat and all of that, is a clear indication of how the company's PRS can scale up. As is well known, the metro coach sells at about 11 crores apiece. And the capacity that is being created once that is operationalized and stabilized, that completely changes the dynamics of the overall company as such.
Absolutely, sir. So the Bangalore Metro is also INR 11 crores, sir. Is that lower than Bangalore Metro?
No, Bangalore Metro is as a manufacturer of CRRC. So there, the material is all pre-supplied. So that doesn't. The entire revenue does not flow into our books.
Okay. Got it, sir. And so just one last question from my side.
Sorry to interrupt you, sir. May we request you to return to the queue for follow-up?
Absolutely. Yeah, yeah, sure. Thank you. Thank you so much.
Thank you, sir.
Thank you, sir. The next question is from the line of Mohit Motwani from Tara Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. My first question is around the dispatch of nine coaches, which has been done in this quarter. Can you let us know for which metro project was this done for?
We do not disclose the customer name for competitive reasons, but we have disclosed that our first rake was flagged off by the Honorable Prime Minister day before yesterday, and some of you may have also seen the visuals wherein it was a moment of pride for the company to see that the Titagarh name was prominently displayed where the Prime Minister was flagging off the coach.
Sure. And in terms of, as you mentioned, that you have shared the 120 coaches, what will be the split? But if you can let us know, now you have four to five metro orders. When do you expect and is there any completion timeline for each of these that you can share with us?
We have already shared that the Mumbai Metro has to be completed, I think, if my memory serves me correct, between around 24 months or so. So each one of them have a different delivery timeline, and we have done our balancing of the capacity accordingly.
Okay. Okay. And lastly, you have done nine coaches in this Q1, and you are expecting to complete 120 coaches by end of this financial year, which is about 111 coaches in the rest of the year. So that is about 12 coaches per month that you'll be doing, and that will be around, I think, close to 50% capacity utilization. So what is driving this change? Is it the operationalization of the new plant, or is there ramp-up of your facilities? If you can give some sense on that.
It's a host of that, sir. So it will not be on an equated basis. I mean, it's not going to be an average run rate. It is going to be ramped up. So it is not going to be on every quarter the same. The idea is that every quarter there has to be an improvement versus the previous one.
Sure. Yeah. Got it.
As we have written also that it marks a beginning for the stainless steel coach production of Titagarh. Our entire stainless steel production line is now fully operational. That in itself is going to be the game changer for us.
Got it. Got it. Thank you for those answers, sir. I'll come back to you. Thank you.
Yeah.
Thank you, sir. The next question is from the line of Aryaman Agarwal from Money Stories Asset Management. Please go ahead.
Good afternoon, so I want to understand how the order pipeline scenario is looking, so in the next nine months, both in the freight railway systems and the passenger rail systems, what sort of demand are we looking at?
Yeah, good afternoon, sir. So we've already given some details about the order book that we have. And you can see that for the passenger rail system, for the Vande Bharat, we have a very healthy order book. For the metro, because of the development time, we are looking at booking further orders, although we have about 440 odd coaches in order with us now. But we have participated, and we are continuing to participate in additional tenders to get further metro business. And the same is the story with the propulsion. While we have some orders, we have an order book of about INR 550 crores in the propulsion, which in itself is a very big thing because this is all these businesses were contributing to less than probably a single digit in terms of %.
All these businesses combined were contributing to less than single digit in terms of the past revenues of the company, and the very fact that the business of each one of the SBU under the passenger has actually started developing on its own is quite significant, so to answer your question, the order pipeline in the investor presentation has been given for the metro, and we have seen it in media about the large tenders that are expected both in terms of metro as well as suburban transport like MRVC, etc., and the company will definitely pursue these opportunities as we go along. As far as the freight business is concerned, we have declared an order book, which is an outstanding order book of about 10,000 wagons, and continuously, during the quarter also, we booked an order of about 900 or some such close to 900 wagons.
We believe that considering the overall cost advantage and the policy of the government to move the transportation from road to rail, the wagon tenders should be issued somewhere this year.
All right, so from the government order perspective, we're not seeing any slowdown as such. The orders are flowing in well.
So the orders for the passenger side have been very robust. For the freight, as I had mentioned earlier, also the small tenders from the railways and private sectors are continuously coming. The large tenders were to be done on a three-year basis. So the last one was done about three years ago. And we are expecting, or I would say, in all probability, the railway should come back with their renewed demand somewhere this year.
Got it. Got it. And secondly, on the shipbuilding business, what sort of a vision do we have with that segment? What sort of a business are we looking at creating?
That's a very interesting segment. So what we have declared in our press release also that the facility that we are creating in Falta would have a capacity to do around 12 to 14 or 14 to 16 vessels per year of up to 150 to 160 meters. And that is quite significant. In terms of the facility that this company, this SPV, will create, we would like to do all sorts of ships, including all sorts of naval ships and other ships.
While the details of this project or the business plan of this project will be issued in due time, and it's just a decision that was finalized yesterday and will be implemented over the next weeks, we believe that considering the number of policies that the government has come out with on the shipbuilding sector and also based on interaction that we've had with the various departments of the government, the government has clearly identified shipbuilding or specialized shipbuilding, particularly as a very core niche sector for the country's development and growth. Particularly because we have the expertise, we have the qualifications of this business, we feel that this can be a very strategic business or a growth-oriented business that we'd like to pursue independently.
Perfect. Thank you. Look forward to having a great year with the TRS ramp-up.
Thank you.
Thank you, sir. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi, good afternoon, and thanks for taking my question. So a couple of questions from my side on the passenger business. So we mentioned in our press release that we expect the dispatch of Ahmedabad Metro coaches to start in Q3. So by when do we expect to kind of complete this order? Will it be in one year, or will it take slightly longer?
Yeah, hi Parvez. So yes, we will complete it within a year because Ahmedabad is only 30 cars. So we have already started the production of two trains that is six cars. And we will deliver the two trains one after the other in Q3, Q4 timeframe. And thereafter, we intend to deliver maybe two to three cars in a two to three trains in a month and complete this. So yes, we will. To answer your question, we expect that based on the delivery timelines of the contract, once we start the delivery, we should be able to complete it in about a year to 16 months' time, both Ahmedabad and Surat.
Sure. For the Mumbai Metro Line 6 order that we have recently received for 108 coaches, the execution timeframe is, I think, about 24 odd months. So from when does this 24 months start?
It started on the 2nd of August, the day we received the LOA.
When do we expect the dispatch to start here?
The first train is likely to or scheduled to be dispatched, I think, if my memory serves me right, in 62 weeks from the 2nd of August.
And lastly, Pune Metro, the additional order that we got is, I think, scheduled to be delivered in 30 odd months. So when do we expect delivery of that to start?
So it starts in 24 months. Yeah, that's another significant thing. I'm sorry I missed that in my opening comments. Thank you very much for asking this question. So the Pune repeat order that we have received during this period is a very significant development for two reasons. Number one, it kind of establishes the confidence of the customer on the company. To receive a repeat order is always a kind of validation of confidence. And the second is that these are aluminum coaches. So what we have gone ahead this time and done is we have used this order to set up our complete aluminum manufacturing line. As you may be aware, that in the past, we were getting the flat packs from our associate in Italy, and we were doing the final assembly of the aluminum coaches in Kolkata.
With this order, we have already now placed the order. And in fact, as a matter of fact, the equipment is already on the high seas, and it should be arriving within this month for making the complete aluminum coaches in Kolkata. This would make us the only company in India to have both aluminum and stainless steel manufacturing complete manufacturing facilities. So we expect, to answer your question, Parvez, that the first train for the Pune under the option should get delivered between 18-24 months and complete thereafter within the next six to nine months.
Second question on the wagon side, I mean, do we?
Sorry to interrupt you, sir. May we request that you return to the question queue for follow-up?
Sure. Thanks.
Thank you, sir. The next question is from the line of Sudeep Anand from Systematix. Please go ahead.
Yeah. Thanks for taking my question. So just one question on Vande Bharat. As we expect our first.
Sorry to interrupt you, sir. Your voice is very low, and it's breaking.
Is it okay now?
Yeah, it's better.
sir, better.
So as we expect our first prototype for Vande Bharat to be ready by Q2 FY27, is it also subject to?
I'm sorry if your voice is again breaking.
Okay. I'm sorry. If your voice is again breaking.
So is it okay now?
Yeah. If you can not be on speaker, that will be easier. Yeah.
Can you hear the handset?
Yeah. I'm using the handset only. Yeah.
Okay.
So what I was asking, sir, since I was expecting the first prototype of Vande Bharat by Q2 FY27, is it subject to approval after that from Indian Railways?
So there is a compliant approval process. And as a matter of fact, we had the delegation from the railways headed by the member, concerned member, even today, which is there in our social media. So this is a concurrent approval process. And then after the train is delivered, it has to go through an oscillation trial. This is a very standard process. So the terms of the contract is that once the prototype is delivered, in two months thereafter, we have to deliver the second prototype. And thereafter, in two or three months, something like that, we can start the regular production and dispatches. That is the time that is normally required for the oscillation trials.
Okay. So basically, we can expect the regular production of Vande Bharat from Q4 FY27, and that's around 20-25 cars, as guided earlier, per month.
I'm sorry. Can you repeat your question? I'm not hearing clearly.
So basically, we can expect the regular production of Vande Bharat from Q4 FY27.
That's a week?
We submit the two prototypes.
Yeah. And roughly about 20-25 cars per month, as we had guided earlier.
Yeah. So 20-25 cars per month goes in a phase.
Okay.
That is the delivery schedule of the contract. The first year we have to deliver them 8 trains, then 12 trains, then 16, and then 25 trains per year.
That's correct. Okay. Thank you so much, sir. Thanks. And all the best, sir.
Thank you.
Thank you, sir. The next question is from the line of Akash from Dalal & Broacha. Please go ahead.
sir, yeah, thanks for the opportunity. So basically, my question is just an add-on to the question one of my earlier participants asked you. So just wanted to have a clarity on from today onwards, that is, from Q2 FY26 onwards, how do we exactly plan to deliver on our metro orders? I mean, if you could help us understand by when we'll be completing the Bangalore Metro and how the revenue will reflect for other metro orders in our books of accounts.
So as I mentioned, sir, that for competitive reasons, we cannot really give customer-wise bifurcation. But we can give the overall planned production and dispatch targets, which is for the current year, we are targeting and we are expecting to deliver 120 cars. This will be a mix of both Bangalore and Gujarat, which is Ahmedabad and Surat, because these are the two contracts that are being executed, which will be followed by the Mumbai and the Pune option clause.
Okay. And just one more confirmation I wanted. So I think earlier in one of our calls, you had alluded that in the Vande Bharat and the metro coaches, we'll be doing somewhere margins around 8%-10%, right? And propulsion will be significantly higher, almost around 16%-18%. So is my understanding right?
So on the metro business, I had mentioned that the margins are similar to the one in the passenger and the freight business, which is between 10-12%. And then, of course, the operating leverage comes in. So being a nascent business, we do expect that we will only be able to improve upon this as we go along. And as far as the propulsion is concerned, you're absolutely right. It is between 15-20% of margin. Again, this is something that we will be able to achieve once we are able to achieve the desired volumes, which we are ramping up, and we should be getting to each one of the targets over the next, I would say, in different aspects, in different quarters.
But on an overall basis, between the next four to six quarters, we should be able to stabilize all the SBUs significantly.
Thank you, sir. Just last follow-up on this. What would be the break-even volume at which we should be able to manage these margins? Like what capacity we need to function to be able to consistently clock a double-digit margin? And similarly, on the propulsion side, what would be the break-even volume?
I had mentioned this earlier in the last call also that we should be able to reach once we are able to reach between 15-20 cars production, we should be able to get the optimum margin. Thereafter, the operating leverage or advantage, once we add on the volume, will only improve the margin from there.
On propulsion?
On the propulsion, as far as propulsion is concerned, there are different business segments. The traction motor, we should be able to get that at about 120 to 150, which we have almost reached now. So at 150 traction motor a month, which we are expecting to, and we've mentioned this in our press release also, by the end of this year, we should be able to stabilize at 150 traction motors a month. That is 450 traction motors a year. We should be able to get to the desired margin. As far as propulsion is concerned, which is the propulsion system, we should be able to do that at between one to one and a half rakes a month. And of course, our target is to get to two rakes a month.
Okay. And for propulsion, we don't have any more revenue share with ABB, right? Or do we still share?
We never had a revenue share with ABB.
For propulsion technology?
We had the technology transfer, but we never had a revenue share. We have some components which we buy from them, and we have already paid them for the transfer of technology that we had to do.
So that's just a one-time, I mean.
Sorry to interrupt you, sir. May we request that you return to the question queue for follow-up? Akash, sir?
Yeah, yeah. Okay.
Yes, sir. Thank you, sir. The next question is from the line of Rajesh Bhandari from Nakoda Engineers. Please go ahead.
Good afternoon, sir. My first question is basically on the wheels. [foreign language] sir, ye wheels ka apna jo ek alag factory ka tha, abhi uska status kya hai? Per year apna kitna manufacture karenge? Aur kya wo apna railways ko denge ya apne khud ke kaam ke liye lenge?
[foreign language] sir, jo wheel ka hamara status hai, jo humne apne press release mein bhi diya hai ki ye trial production jo hai, wo Q4 is saal ke ya Q1 agle saal ke, yani from let's say January to June, between January to June, it will get stabilized, the trial production. And total capacity that we are investing in that unit will be about 220,000 wheels, jismein 80,000 wheel ka hamara offtake hai government ka Railways ka. Aur baaki jo hai, wo hum bhi use kar sakte hain aur hum logon ko bech bhi sakte hain.
[foreign language] Achha. To ye jo hai, sir, ismein two lakh wheels we will be able to manufacture. Means one lakh set. One lakh set ho gaya na, sir?
[foreign language] बराबर. बिल्कुल.
[foreign language] Haan. To ye jo hai, ismein kya turnover expect kar sakte hain, sir?
[foreign language] sir, ek wheel ka jo approximate selling price hota hai, wo lagbhag lakh rupaye ke aaspaas hota hai, 80,000 se lakh rupaye. So.
[foreign language] Wheel set ka?
[foreign language] Wheel ka. Ek wheel ka.
[foreign language] ओ, अच्छा. अच्छा. तो अपन पूरा ही बनाएंगे, सर, व्हील एंड व्हील सेट पूरा ही बनाएंगे?
is a mixture of that, but right now it's a primary wheel plant, and then subsequently we can start making wheel set also over there, sir.
Okay. Forging will be supplied by this Ramkrishna Forgings?
No. This is a plant which will forge itself. So they will be buying. This is a joint venture between us and RK Forgings. And so this will be an end-to-end plant.
[foreign language] Achha. To ismein, sir, ye apna itna jo time laga, any reason? Because I understand, ek wo koi Hilton Metal Forging company hai, they also got approval from RITES?
I would not like to comment on that. But this is a plant that has been set up in a record time. I can only tell you that.
[foreign language] Oh, accha. sir, mera ek question aur hai ki jaise.
[foreign language] सॉरी, सर.
sir, Ma'am, this is my second. This is my second question. Please let me ask. Please.
[foreign language] ओके, सर.
[foreign language] sir, aapne bataya ki signaling system mein apna hai, to are we into Kavach system also? And our turnover for FY27 and 28 total?
We are not into Kavach system as of now, sir.
[foreign language] Haan. Aur apna turnover for 27 and 28, sir? FY27 and FY28?
We do not give any forward-looking projections of that nature. We have given quantitative projections in our press note, sir.
[foreign language] Theek hai. Theek hai, sir.
[foreign language] थैंक यू.
Thank you. Thank you, sir.
Thank you, sir. The next question is from the line of Aniket from Step Trade Capital. Please go ahead.
[foreign language] हेलो.
Yes, sir. Please go ahead.
just want to clarify the news coming out of losing INR 173 crore. Hello. Am I audible?
[foreign language] यस, सर.
There is one news which is coming out, which is a risk of losing INR 173 crore linked with Italian subsidiary Firema. Can you clarify this?
sir, this is the investment that we have made in our Italian associate Firema. We have given the disclosure both in our press note as well as in our results, both March and in June. That Firema has been facing certain challenges, financial and operational challenges. As is well known, we had invested into Firema and initially acquired it as a 100% subsidiary. Subsequently, it became a jointly owned company between us and the Government of Italy, where the Government of Italy also, along with other investors. Government of Italy owns about 30%. Other investors also own certain percentage. It ceases to be a subsidiary of the company, and it remains as an associate. The value of investment, the standing value of investment, is the value which has been disclosed in our financial results.
Over a period of time, the primary purpose and the goal of acquiring technology credentials and setting up our passenger rail system business has already been achieved. And today, the company is fully independent in terms of the passenger rail system business, and is able to execute the orders with no support required from Firema. The company Firema is now under what is called a CNC process, and we are in active dialog through the ministry to explore if the government can either enhance their stake or there can be other equity investors. So, this is a situation which is uncertain, and therefore clarity should emerge on that by the end of this calendar year and Q3 and Q4 of this financial year.
The amount which has been disclosed in the results is the amount which has already been invested in the past by the company. So, there is no cash loss or potential cash loss. But considering the overall size of the company, the size of the asset, and the strategic nature of the asset to the government, we are hopeful of finding a positive resolution as we go along.
Okay, sir. Thank you. So, there is one more question. As you mentioned, the land acquired by the company from the government, right? So, could you just clarify that what is the purpose of the land and how it is going to be utilized?
I have already mentioned this in my opening comment, sir. It is that this is the land which is contiguous to our existing passenger rail system factory. In fact, we, as I mentioned, that it is just the boundary wall had to be removed in order to take possession of the land. This is going to be used for expanding both the production as well as backward integration. But more importantly, the testing and commissioning of rakes that are going to be produced in the passenger rail system. We have acquired this land, which is about 40 acres in size, on a total payment of around INR 136 crore-137 crore to the government.
So, could you please specify what kind of backward integration the company is planning to do?
It is Backward Integration of the coach manufacturing. So, the components that going to the coach manufacturing, whether it is the various components and CRF and things like that.
Okay. Thank you, sir.
Thank you, sir. The next question is from the line of Rehan Syed from Trinetra Asset Managers. Please go ahead.
Oh, yeah. Thank you for watching the video, and, sir, I want just more clarification regarding your Vande Bharat, and understandable, right?
Yes, you are, sir.
[foreign language] यस, सर.
Yeah. So, sir, I want just more clarification regarding your Vande Bharat ramp, forecast and cost base for two plants to start in 2027, so I want to clarify.
If you can. Sorry, your voice is echoing. If you can just not be on the speaker mode, it will be easier.
No, sir. I am on my handset. I will just repeat my question again.
[foreign language] या.
So, sir, just I want to clarify regarding your Vande Bharat sleeper train prototype that you have comments regarding expected by quarter two FY27. So, how is the company mitigating potential delay, especially given the complexity of the design and manufacturing life?
So, we have a very robust system of monitoring, sir, and project management. We have a full team which is working on that. And in a project of this, which also involves many things, many latest steps that have to be taken by the counterpart, which is the Railways. They have to be very closely managed and dealt with the customer themselves. So, as of now, we are not expecting any delay from the schedule that we have shared in our presentation. And, of course, you know, if there are certain areas, we will suitably. I mean, there is no one medicine for all problems. So, depending on if there are problems, we will resolve them as we go along.
Okay. So, sir, as of now, we are on the line for that, right?
[foreign language] दैट्स राइट.
Yeah. Okay. Thank you for this insight.
[foreign language] थैंक यू.
Thank you, sir. The next question is from the line of Vivek Gupta from Star Investment. Please go ahead.
Yeah. Hi. Am I audible?
Yes, sir. You are.
[foreign language] यस, सर.
Yes. So, my first question would be just to understand the long term strategic goals for Titagarh Naval Systems Private Limited following the transfer of the ship building business. Like, is the company actively considering external investors and strategic partnership to scale the operations? Additionally, what is expected timeline for finalizing the strategy for the defense and bridge business segment? And whether this involve a full divestment or a joint venture or another form of strategic collaboration?
Yes. Thank you very much for your question. So, as far as the ship building business and the naval business is concerned, we have very clearly mentioned and I would like to restate that we are open to all sorts of options, both in terms of strategic partnerships and joint ventures, primarily in order to capture the growth potential and the opportunities in this segment. And as we go along, this will be defined in terms of the timeline for the defense end and what we exactly intend to do. That is what the board committee has been constituted for. And we expect that over the next maybe two to three months time, we will be able to have the final deliberation. And then, of course, subject to the approval of the board, will communicate the final outcome to you yourself as well as to the markets.
Whether we would look at a complete divestment, joint venture, strategic partnership, this is something exactly what we would evaluate, but what the board has very clearly identified that for Titagarh Rail Systems, our core business has been the railways and should be the railways, and we should not have non-core businesses within the company, which end up taking away from both financial and managerial resources.
As a matter of fact, when we had ramped up the passenger rail system two years, two years ago, about two years ago, when we got the Vande Bharat, I had in fact mentioned it that time also in my investor presentations and calls, that we had decided not to allocate any business and any capital and managerial time to this business, the ship building business for the next couple of years. And thereafter, we will formulate the strategy of what we have to do with this. Having spent a lot of time, effort and energy in coming to the stage where we are in the ship building business, where we are meeting with a lot of eligibility credentials, and we have developed a very good brand name in the customer fraternity for the vessels that have been manufactured by us.
Some of them have also been featured in the Presidential Fleet Review of the Government of India, which is a very significant recognition. We felt that it was not in the interest of the company to just let that be and walk out of that business, but to grow it in a separate manner, without disturbing and without taking away from the importance of the rail business, but accord separate importance to this business as well. The same will be the motivation for the defense and the bridges business, where the deliberation will be done keeping the same considerations.
Okay. Okay. So, with the new land acquisition in Uttarpara, could you just provide the timeline for full operationalization of that extended facilities, that is including the 1.6-kilometer test track, and what would be the investment that is required?
We just acquired this land a couple of weeks ago, maybe two to three weeks ago, and we have already started the working on that. Once the entire plan is finalized, we will definitely announce it. In terms of the timeline for implementation, we expect to do it in phases. As I had mentioned, the phase of production increase as well as backward integration and the test track. All of that, we will share in due course of time. I can share that we will be moving very fast, particularly for the phase one, wherein the immediate requirement of the test track and the expansion in order to achieve the current first level of targeted production for 50 cars a month, which is 25 metros and 25 Vande Bharat. We are targeting to implement that within the next 12 months.
Okay. Thank you. That's it from my side.
[foreign language] थैंक यू।
Thank you, sir. The next question is from the line of Pranjal from Morgan Stanley. Please go ahead.
Thanks for taking my question. sir, I have two questions. One related to the CapEx that we would incur for this financial year and FY27. While we do understand that we would do CapEx of around 140 odd crores for the land. But in terms of capacity addition, any additional CapEx do we assign here?
Hi Pranjal. So, yes, INR 140 crore is what we have already spent for the land. That is not going to be spent in the future. In terms of building the facility on that land, we will have to incur CapEx. But this will be within the overall CapEx plan that was already presented. We had mentioned in the past that we will be spending about a total of INR 1,000 crore or so. And this will be forming a part. Additional CapEx if required will be something that we are still working on and we will share with you. But because we are moving in phases in terms of putting the CapEx alongside with the business growth, we don't envisage for the current levels to have significantly higher CapEx than what we had already budgeted for.
This one classification here. So, this INR 1,000 crores would be spent over the next three years is what I recollect.
Including what we have already spent in the last year. So, yes, that's right. Over the next couple of years, so last year plus this year and next year. So, this will all be completed by FY27.
And sir, related, and my second question is related to the order book that we have on the wagon side of roughly 10,700 odd wagons. So, if you could provide a rough mix between the share of Indian Railways and private orders?
I don't think we normally share that due to competitive reasons. And whatever the data has been given in our investor presentation is what I can share at this point of time.
And sir, one last question with just one clarification here as well. The propulsion that we co-develop with ABB, so are we going to use the same for our Gujarat metro projects and the Mumbai Line Six as well?
Mumbai Line Six, we have just received the LOA about just less than 10 days ago. So, we are still evaluating what exactly we will be doing as far as that is concerned. But Gujarat Metro, the propulsion that we are using is a mixture. So, the TCMS is something that we have acquired the transfer of technology from ABB. And the traction converter is something that we are buying from them.
sir, this was my question. Thank you and all the best.
Thank you so much.
Thank you, ma'am. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi, thanks for taking my follow-up question. We wanted to get your views on wagon tendering, both from Indian Railways and private sector. While obviously, private sector, I mean, we have seen small size orders both from private sector and Indian Railways. But do we expect any large size tender from Indian Railways? And if yes, I mean, when do we expect that? Will it come in FY26? And there is a possibility that it may shift to FY27? Thank you.
So, we are now seeing a lot of small tenders being floated by the railways and by the private sector alike. And there is of late some good flow of inquiries and traction from various particular private sector customers and potential customers for wagons. As far as the large tender is concerned, you know, this is something which is very difficult to predict. But we are, based on our expectations and assessment, hoping that the tender should get issued by end of this financial year and beginning of next financial year. I would say more, we hope that it should come towards the end of this financial year. But that is something which is only something that we can assume. And ultimately, this is a decision that follows many aspects and many considerations of the government.
sir, thank you.
Thank you, sir. Ladies and gentlemen, in the interest of time, that was the last question. I now hand the conference over to Mr. Umesh Chowdhary, Vice Chairman and Managing Director of Titagarh Rail Systems Limited, for closing comment. Over to you, sir.
Yeah, thank you very much. And once again, thank you everybody for joining this call, taking time out to ask so many relevant questions. As I mentioned in the beginning, you know, this year is a very important year for us. This year and the next year are very important years for us, particularly because of the take off stage of the passenger rail system business. These two years are going to see significant developments on the SBUs of the passenger rail system. We have given in our press note the way we are developing this business, particularly from being a pure manufacturing company. We are actually becoming a technology company.
We have invested significantly on design and engineering and R&D, and we are continuing to do so and grow upon that investments. This will be a paradigm shift in the future of the company, because in the two segments of the company, the freight rail segment and the passenger rail segment. While the freight rail segment is more, I mean, I could classify it as almost like an annuity business, because the wagon demand, considering the GDP growth, etc., barring few quarters here and there, you know, like we had this year, this quarter of wheel set challenges.
There could be other challenges as we have faced in the past also. But by and large, this is a steady business. But the real growth driver for the company on an overall basis will start coming in from the passenger rail segment, which if we compare simply the order book today, out of a 26,000 crore order book, including our share of joint venture, the wagon business order book is just about 4,000-4,500 crore. Whereas that was the business that contributed to more than 90% of our revenue historically, and maybe 95% of our revenue historically. That extrapolated kind of gives us the confidence and the expectation to be able to completely change the trajectory of the company with the stabilizing of the passenger rail system. So, thank you very much for the support, for the interest in the company, and look forward to our future interactions.
Thank you, sir. On behalf of Titagarh Rail Systems, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.