Titagarh Rail Announces Plans To Venture Into Wagon Leasing Business

Titagarh Rail Systems Ltd. is set to venture into the wagon leasing business, in order to gain a larger share of the private sector market by offering long-term lease models, according to a statement from a top company official on Tuesday.

The company has progressed in securing the licence for this strategic business venture and is evaluating how to structure it, he said.

It will be carried out via the firm's own balance sheet or through a special purpose vehicle.

"We are evaluating whether to carry out leasing business from the company itself or through an SPV. Since wagon leasing will be categorised as operating leasing and not a financial one, an NBFC (Non-Banking Financial Company) license is not a necessity," Titagarh Rail Systems Vice Chairman and Managing Director Umesh Chowdhary told PTI.

Chowdhary called attention to the opportunities in the segment, stating there is potential to target a market of around 1,500-2,000 wagons that are procured on lease every year.

"We believe this is a very interesting business to be in. We are targeting this segment," he said, highlighting the company's aim to become a prominent name in the wagon leasing ecosystem and alluding to a path to recurring revenue streams.

The reasoning behind the move is comprehensive. The private sector is showing an exceeding preference for acquiring wagons on an operational lease basis instead of capital expenditure.

According to Chowdhary, recent policy discussions show that wagon leasing companies may be allowed to maintain the wagons they own.

This strategic shift towards leasing is backed by the company's past experience, having previously carried out leasing transactions for wagons with the Indian Railways, which aided it in qualifying for a new license.

The move into leasing is part of Titagarh Rail's broader strategy to diversify its revenue streams and deepen its market penetration, the official said.

The foray into wagon leasing is expected to not only boost sales but also establish long-term relationships with private sector players in the logistics chain, he said.

The management announced that the long-standing issue of wheel set availability has been resolved, allowing production to normalise to a run rate of 800-850 wagons per month.

Wagon production had suffered in the previous two quarters.

With a robust order book of approximately Rs 28,000-29,000 crore providing visibility for the near term, the company is looking to leverage its manufacturing prowess and financial strength to create new growth avenues in the evolving rail logistics landscape.

(With PTI Inputs)