Kalindee Rail intends to chug on dedicated freight corridor

Expects to garner contracts worth Rs 10,000 crore

MUMBAI: Kalindee Rail Nirman (Engineers) Ltd, a company that is into laying railway tracks and setting up signalling and communication systems, has hinged bets on the proposed dedicated freight corridor planned by the Centre.

The project entails setting up of an eastern and western freight corridors at an estimated cost of Rs 51,000 crore.

Kalindee expects to garner contracts worth as much as Rs 8,000-10,000 crore in five years, riding project, which would include full track work, signalling, station building, communications and other turnkey projects.

R D Sharma, chairman and managing director, Kalindee, said, “The type of projects available will be known only when the tenders are called, but based on our credentials we are expecting to get a business equivalent to about 15-25% of the total project cost.”

Analysts said the company is well-placed in the segment to take advantage of this opportunity. Kapil Yadav and Gracy Mittal, analysts with Dolat Capital, in a recent report said Kalindee is a niche player with established credentials. They find the company “a scalable beneficiary” of the corridor project.

The Indian Railways’ ambitious plan will connect the Jawaharlal Nehru Port in the outskirts of Mumbai to New Delhi, Ludhiana and Kolkata,  a distance of 2,763 kms.

This will comprise two corridors — the western one between Mumbai and Delhi, and the eastern one between Ludhiana and Kolkata. The first-phase cost of setting this up is estimated at Rs 28,200 crore.

The Japan International Cooperation Agency, which undertook a study on the freight corridor, estimated the total cost of the project at around Rs 51,000 crore.

When fully operational, the corridor would de-bottleneck the existing rail infrastructure and increase capacity for carrying up to 12,000 tonne cargo on single train at higher speeds, compared with the current average of 4,000 tonne at low speeds.

For the planning and execution of this mega project, the government has formed a special purpose vehicle called the Dedicated Freight Corridor Corporation of India Ltd.

The SPV will start floating multiple tenders for the project starting in March 2008.

Since these projects are too large to be taken up individually, potential bidders such as Kalindee are looking at setting up consortia with foreign entities. These international joint ventures for domestic projects would also lead to higher margins and KRNL expects it be at least 20%.

Kalindee’s Sharma said global giants such as Mitsubishi from Japan, France’s TSO and companies from the UK, the US and Russia have all sought partnerships.

“Engineering giant Larsen & Toubro has also approached,” said Sharma.

Kalindee will decide on the partner only after the tenders are out.

The key area of alliance will be financial because considering its size of balance sheet, Kalindee is too small compared with the size of the project coming up.

“We require partners only for financing and large volume of civil works that will be needed. We will consider only two or three partners, as needed,” said Sharma.

He is, nevertheless, confident of raising funds.

“Many firms, including broking house SSKI and Motilal Oswal, and banks such as UTI and Yes Bank, have expressed interest in being our exclusive partner to finance the corridor project,” Sharma said.

He said to start work on the project, it would require only funds to the tune of Rs 200 crore, for which, the company may take in just a single partner. Kalindee  currently has orderbook of Rs 500 crore. This includes railway projects such as track work, signalling, communications and overhead traction, apart from work for Vedanta Resources, Reliance Energy and OCL.

The company is expecting to top the Rs 300 crore turnover mark in the current financial year compared with Rs 188 crore in the last fiscal.

s_archana23@dnaindia.net