Detailed Narrative
Wagon Business Revival and Wheel Set Resolution
The company's wagon business, which had been impacted by wheel set availability issues for the past 2-3 quarters, has seen a resolution. Normal wheel set supply resumed in August 2025, allowing production to return to a run rate of 800-850 wagons per month. A joint venture with Ramakrishna Forging to produce wheels in Chennai is expected to be operational by Q1 of the next financial year, aiming to permanently resolve this industry-wide problem.
Aggressive Passenger Rail Expansion and Deliveries
Titagarh Rail Systems has secured significant order book visibility for its Metro Coach business up to FY28 and Vande Bharat up to FY31. Production of Aluminium coaches is slated to begin in Q1 FY27. The prototype for the Gujarat Metro is expected to be delivered in Q3 of the current financial year, with a subsequent ramp-up to 2-3 trains per month. The company aims to deliver 100-120 passenger cars this financial year, a substantial increase from the previous year, and plans for the first Mumbai Metro and Vande Bharat Sleeper deliveries in Q3/Q4 of the next financial year.
Strategic Backward Integration and Supply Chain Resilience
To mitigate perennial supply chain challenges🌐, Titagarh is undertaking significant backward integration. The company expects to have 100% of its car body manufacturing in-house by March 2026. This move is aimed at enhancing technological and facility-wise capabilities, streamlining processes, and securing approvals, thereby strengthening its supply chain resilience.
Shipbuilding Segment Spin-off and Growth Strategy
The marine/shipbuilding business is being spun off into a new entity, Titagarh Naval Systems, with an initial capital induction of Rs. 50 crores from the parent company. This new entity will focus on specialized vessels, particularly those 100-160 meters in length, targeting a capacity of 16-18 vessels per year. Each vessel is expected to realize Rs. 100-250 crores, with an anticipated EBITDA margin of 15-17% for this specialized segment.
Propulsion and Service Business Development
The propulsion system is being developed as a separate Strategic Business Unit (SBU) to cater to internal requirements and supply components to Indian Railways. The company is already selling traction motors and expects to start propulsion system supplies for EMU this quarter. With technology transfer for TCMS from ABB, Titagarh aims to introduce its own propulsion for Metro coaches within 2-3 years, targeting an EBITDA margin of 15-20% for this business. The service business (AMC) is also highlighted as a high-margin segment, with 15% AMC for Mumbai Metro and 4% for Vande Bharat, targeting 20-25% EBITDA.
Firema Joint Venture and International Market Approach
The initial objective of the Firema joint venture, which involved technology transfer and setting up manufacturing in India, has been achieved. Titagarh is now in discussions with the Italian government, a significant shareholder in Firema, to potentially dilute its stake. The company's international strategy will continue to focus on exporting products from India rather than establishing manufacturing presence abroad, with a long-term view to re-enter the international market for Aluminium coaches.
Working Capital Management and Tax Rate Outlook
The company reported comfortable working capital management, with sufficient and unutilized working capital limits. The tax rate for Q2 FY26 was approximately 26%, which management attributed to specific transactions during the quarter. They expect the tax rate to normalize to around 25.5% over the full financial year.