Texmaco Rail & Engineering Limited — Q4 FY25 earnings call

Call held 17 May 2025

Management summary

Texmaco Rail & Engineering Ltd. reported a sterling performance for FY25, marked by substantial growth in revenue and profitability, driven by increased freight car deliveries and operational efficiencies. The company is strategically expanding its global footprint through partnerships and a new Global Capability Center, while also pursuing a demerger of its infra segment. Despite strong financial metrics, management faced questions regarding Q4 margin anomalies and a significant discrepancy between cumulative EBITDA and cash flow from operations over the past five years.

Highlights

  • Revenue from operations for FY25 was ₹5,107 crores, indicating a growth of 45.8% YoY.

  • EBITDA for FY25 stood at ₹525 crores, a 57.6% YoY increase, with a margin of 10.3%.

  • PBT for FY25 was ₹345 crores, showing a significant 112.5% YoY growth.

  • The company delivered 10,612 Freight Cars in FY25, a 51% jump compared to the previous year.

  • Return on equity improved to 8.4% in FY25 from 4.9% last year, and return on capital employed increased to 16.2% from 13.6%.

  • Strategic global partnerships were established with Nevomo and Trinity Rail to enhance technology and market reach.

  • CARE Ratings upgraded the company's long-term and short-term facilities to CARE A and CARE A-1.

  • Targeting a 40% CAGR for the FCD division (rolling stock & casting) combining domestic, private, and export markets.

Concerns

  • Poor cash conversion from EBITDA

Key financials

2 periods

Headline

  • Revenue from Operation
    ₹5,107 Cr
    YoY +45.8%
  • EBITDA
    ₹525 Cr
    YoY +57.6%
  • EBITDA Margin
    10.3%
  • PBT
    ₹345 Cr
    YoY +112.5%
  • Freight Cars Delivered
    10,612 units
    YoY +51%

Q4

  • One-off Expenses
    ₹20 Cr

What they filed

Q1 FY27: revenue down 16.9%, net profit up 72.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,346 1,326 1,346 911 1,258 −7%1,042 −21%1,167 −13%757 −17%
EBITDA132 131 98 71 124 −6%89 −32%106 +8%57 −20%
Net profit74 76 39 29 64 −14%42 −45%58 +49%50 +72%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Freight Car Division
    ₹4,300 Cr Revenue
  • Infra - Rail and Green Energy
    ₹438 Cr Revenue
  • Infra - Electrical (Bright Power)
    ₹368 Cr Revenue16% EBITDA Margin₹44 Cr PBIT₹1,900 Cr Closing Order Book
  • Jindal Rail (Texmaco West)
    ₹900 Cr Turnover₹125 Cr PBT
  • Foundry Casting
    ₹750 Cr Revenue
  • Other Hi-tech Components
    ₹50 Cr Revenue

Guidance & targets

Industry Outlook

  • Wagons expected to be delivered (India) Industry Outlook · next three to four years · High confidence 1.5 lakh
    approximately 1.5 lakh wagons are expected to be delivered in the next three to four years.

    — Indrajit Mookerjee

Capacity

  • Consolidated annual production capacity Capacity · null · High confidence 15,000 wagons
    With a consolidated annual production capacity of 15,000 wagons, Texmaco is ready to capture its fair share of this demand and contribute to the sector's development.

    — Indrajit Mookerjee

Export Revenue

  • Export market percentage of revenue Export Revenue · future · Medium confidence 20-25%

    From 2-5% today

    25% threshold or 20% threshold maximum should be of our export market starting from a percentage of around say, 2% to 5%.

    — Sudipta Mukherjee

Business Mix

  • FCD division (rolling stock & casting) ratio (private vs. government/export) Business Mix · immediate future · Medium confidence 60-30

    From 65-35 today

    Ideally in the near future, in the immediate future, we want to make this ratio to at least 60-30.

    — Sudipta Mukherjee

Revenue Growth

  • CAGR (overall) Revenue Growth · next 2 to 3 years · Medium confidence 35-40%
    Yes, and so given all the initiatives that we have taken, a 35% to 40% CAGR is something what we can assume for the next 2 to 3 years going ahead?

    — Sudipta Mukherjee

  • CAGR (FCD division - domestic, private, export) Revenue Growth · null · High confidence 40%
    Combining domestic, private and export, we feel 40% in the FCD division is possible to be achieved.

    — Sudipta Mukherjee

Merger Approval

  • Final approval for Texmaco West Rail Limited merger Merger Approval · January 2026 · High confidence January 2026
    We are working with the NOCs, and we are expecting final approval in January 26.

    — Kishor Kumar Rajgaria

Foundry Production

  • Production volume Foundry Production · this year (FY26 implied) · High confidence > 50,000 metric tons
    if you see that this year we are going to produce at least more than 50,000 metric tons from our present capacity itself.

    — Indrajit Mookerjee

Freight Market Growth

  • CAGR rate of freight market (private and government sector) Freight Market Growth · null · Low confidence < 6%
    The indication what we got to study is it was a little less than a 6%, what we knew, but to be specific in and around this is difficult.

    — Indrajit Mookerjee

CAPEX

  • CAPEX for FY '26 CAPEX · FY26 · High confidence similar to last year
    So our CAPEX will be like the last year only.

    — Kishor Kumar Rajgaria

Texmaco Nymwag Facility

  • Incremental wagons manufacturing Texmaco Nymwag Facility · null · Medium confidence ~2000
    if I have to say the mean, it will be around 2000.

    — Indrajit Mookerjee

Asset Turnover

  • Asset turnover Asset Turnover · in course of time · Medium confidence touch back to almost the same number (8)

    From 5 today

    the asset turnover issue will go up and it may touch back to almost the same number.

    — Indrajit Mookerjee

Risks & concerns

  • Poor cash conversion from EBITDA

    high

    Analyst highlighted a significant gap between cumulative EBITDA (₹1,100 crores) and cash flow from operations (₹20 crores) over 5 years, which management could not immediately explain, broadly attributing it to working capital absorption and capital investments.

    Analyst acknowledged

  • Wheel supply issues for wagon production

    medium

    Historically, there were mismatches in wheelset supply, but management stated that RWS supplies have significantly improved recently, though Q1 might still see some impact.

    Analyst acknowledged

  • Impact of geopolitical issues on supply chain

    medium

    Geopolitical issues and war situations caused disruptions in the supply chain, but management believes things are normalizing.

    Management acknowledged

  • Q4 margin pressure due to one-off expenses

    low

    Q4 margins were impacted by ₹20-25 crores in one-off provisions, mainly for slow-moving debtors, which management views as an anomaly for the quarter.

    Management acknowledged

Areas of evasion (3)

  • Detailed explanation for Q4 wagon production decline
  • Comprehensive strategy to close margin gap with peers
  • Detailed explanation for poor cash conversion from EBITDA

Q&A highlights

0 direct, 1 evasive
Decline in Q4 wagon production and potential wheel supply issues Partial
I don't think that wagon production should be considered in quarter-to-quarter basis because it's not like the production doesn't happen like this in the few 50s and few 100s. You have to take it in continuity...

Analyst questioned a potential operational slowdown in Q4 and a known industry bottleneck (wheel supply), with management providing a qualitative explanation for the Q4 dip and acknowledging past issues while noting recent improvements.

Asked by Nidhi Shah

Lower EBITDA margins compared to industry peers (Jupiter, Titagarh) Partial
Our margin for the year 2024-25 has been 10.3%. So, that is as Sudipta has said, it is up from 9.5% to 10.3%... Q4 may give some anomalies because certain adjustments are done.

This question highlighted a key investor concern about profitability relative to competitors, with management attributing Q4 anomalies to specific adjustments but not directly addressing the broader peer comparison or strategy to close the margin gap.

Asked by Akash Vora

Significant discrepancy between cumulative EBITDA and cash flow from operations over the past 5 years Evasive
it is a very good question, we definitely will give you the proper answer, but I am just giving certain broad factors that our wagon production has gone up by 3x or 3.5x. So obviously, 3,000-10,000 there must have been absorption in the working capital... Really, it is a good question. We will prepare the answer.

This question pointed to a critical financial red flag (poor cash conversion despite strong EBITDA) and management's inability to provide an immediate, clear explanation, suggesting a potential underlying issue or lack of detailed financial oversight.

Asked by Amit Kumar

3 min read 7 chapters

Detailed narrative

Robust FY25 Financial Performance

Texmaco Rail & Engineering Ltd. delivered a strong financial performance for the full year FY25, with revenue from operations growing by 45.8% year-on-year to ₹5,107 crores. This growth translated into a 57.6% increase in EBITDA, reaching ₹525 crores, and an EBITDA margin of 10.3%. Profit Before Tax (PBT) saw an even more significant surge, rising by 112.5% to ₹345 crores, underscoring the company's strategic transformation and operational efficiencies.

Significant Growth in Freight Car Deliveries and Foundry Sales

The company's core business saw substantial volume growth, with 10,612 Freight Cars delivered in FY25, marking a 51% increase from the 7,028 units in the previous year. This surge in deliveries was a primary driver of revenue growth, while realizations remained stable. The foundry division also maintained its performance, reporting sales of 41,500 tons in FY25, consistent with the prior year's levels.

Strategic Partnerships and Global Capability Center

Texmaco established two pivotal global partnerships in Q4 FY25: one with Nevomo, a European firm focused on high-speed rail diagnostics, and another with Trinity Rail, a leading US-based rolling stock manufacturer. These collaborations are aimed at enhancing Texmaco's technological capabilities and expanding its reach into international markets. To further support these initiatives, the company is setting up a Global Capability Center (GCC) in Faridabad, which will serve as a research and innovation hub and a global sourcing partner, with commercialization expected in the current financial year.

Demerger and Capacity Expansion

The proposed merger of Texmaco West Rail Limited (erstwhile Jindal Rail Manufacturing Company) and the business transfer of Infra-Rail and Green are underway, with final approval for the merger anticipated by January 2026. This move is expected to unlock value and streamline business operations. Texmaco's consolidated annual production capacity stands at 15,000 wagons, and the company plans to produce over 50,000 metric tons from its foundry division in FY26.

Segmental Performance and Future Outlook

In FY25, the Freight Car division generated ₹4,300 crores in revenue. The Infra - Rail and Green Energy segment contributed ₹438 crores, while the Infra - Electrical (Bright Power) division reported ₹368 crores in revenue, achieving a 16% EBITDA margin and ₹44 crores PBIT. Bright Power's closing order book was approximately ₹1,900 crores. Management expressed confidence in capturing demand from the Indian Railways' target of 1.5 lakh wagons over the next 3-4 years and aims for a 40% CAGR in the FCD division.

Q4 Margin Anomalies and Cash Flow Concerns

Q4 margins experienced some pressure due to one-off expenses and provisions totaling ₹20-25 crores, primarily related to slow-moving debtors. A significant concern raised by an analyst was the large discrepancy between cumulative EBITDA (₹1,100 crores) and cash flow from operations (₹20 crores) over the past five years. Management acknowledged this as a 'very good question' but could not provide an immediate, detailed explanation, broadly attributing it to working capital absorption from increased production and capital investments, promising a prepared answer later.

Fixed Asset Growth and Asset Turnover Improvement

The company's fixed assets increased substantially from ₹460 crores last year to ₹1,000 crores this year, mainly due to the acquisition of Texmaco West. This led to a decline in asset turnover from 8 to 5. Management expects this ratio to improve and return to previous levels as the acquired assets begin to generate output more efficiently, leveraging the multiplier effect of the acquisition over time.

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