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These railway stocks have rallied upto 50% in past two weeks; here' why
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5 min read | Updated on July 14, 2024, 17:11 IST
SUMMARY
Railway shares have been surging for the past two weeks because of immense buying strength and government announcements that described the arrival of new passenger coaches and locomotives. As a result of new agreements, strategic partnerships have further increased the value of Rail Vikas Nigam, Indian Railway Finance Corporation, and Ircon International.
Government initiatives and robust capital expenditure plans boost railway stock like RVNL, IRFC, and Ircon International
Railway stocks have witnessed a strong surge in the past two weeks, driven by strong buying interest since the pre-opening of every trading day.
Rail Vikas Nigam Limited shares are up 51% on the National Stock Exchange (NSE) in two weeks. IRFC’s share price reached a new peak, logging 25% gains in two weeks, while Ircon International shares climbed to a new peak of ₹349, recording around an increase of 25% in two weeks.
Why are railway stocks rising?
The broader market is on a streak of making new all-time highs, and railway stocks are leaping ahead every trading day. The whole railway sector is rallying to new highs, reacting to the Minister for Railways, Ashwini Vaishnav, announcing the plans to manufacture 2,500 new general passenger coaches and 10,000 additional coaches.
In addition to this, the creation of 50 new Amrit Bharat trains fueled the rally in railway stocks further. Apart from the slew of announcements, investors are also looking forward to the upcoming Union Budget for more such government investment outlays in the coming years.
Indian railway companies are increasing their capital expenditure (Capex), which is likely to boost their business volumes. Despite high valuations in the Indian stock market, investors are optimistic about railway stocks and are heavily investing in them.
Stock specific push
Apart from sectoral developments, individual stock-specific announcements also gathered investors' attention, pushing many railway-related stocks to record highs. Rail Vikas Nigam Ltd (RVNL) was the top gainer in the industry, with nearly 50% gains in two weeks after these announcements.
Rail Vikas Nigam Ltd (RVNL)
Rail Vikas Nigam Ltd was Incorporated in 2003 by the Govt. of India, it is engaged in the business of implementing various types of Rail infrastructure projects assigned by MoR including doubling, gauge conversion, new lines, railway electrification, major bridges, workshops, Production Units and sharing of freight revenue with Railways as per the concession agreement entered into with Ministry of Railway. RVNL had a healthy order book position of ₹85,000 crore crore as of March 31, 2024.
RVNL surged by 50% in the past two weeks, the company has seen the following stock-specific developments
| Date | Development Summary | Details |
|---|---|---|
| 09-Jul-24 | RVNL emerges as Lowest Bidder (L1) from SER HQ-ELECTRICAL/SER | Design, Supply, Erection, Testing, & Commissioning of 132 KV Traction Substation and related posts in 2x25KV System on the Kharagpur - Bhadrak section. |
| 09-Jul-24 | MoU with TATWEER Middle East and Africa LLC | Joint capabilities in the design and execution of rail-based work in the MENA Region and European Countries, Smart Cities, Digital Transformation, and Engineering Services. |
| 09-Jul-24 | Letter of Acceptance from Maharashtra Metro Rail Corporation Limited (Nagpur Metro) | Construction of 6 Elevated Metro Stations in Reach 2B of NMRP Phase 2. |
| 10-Jul-24 | MoU with IMS Consultancy Private Limited | Technical and advisory services for projects in Railways, MRTS, Tunnels, Roads, Bridges, Building Works, Airports, Ports, Irrigation, and Power sectors in Nepal. |
| 11-Jul-24 | Letter of Acceptance from Central Railway | OHE modification work for Up-gradation of existing 1 x 25 kV Electric Traction System to 2 x 25 kV AT Feeding System in Amla-Nagpur Section. |
Source: BSE Filings
Indian Railway Finance Corporation (IRFC)
Incorporated in 1986, the Indian Railway Finance Corporation borrows funds from the financial markets to finance the acquisition/creation of assets, which are then leased out to the Indian Railways as finance leases.
IRFC surged by 25% in the last two weeks which the company has seen following stock-specific developments recently. Where on May 29, S&P Global Ratings revised its rating outlook on the IRFC to positive from stable. S&P Global Ratings highlighted IRFC's critical role in India's economic development, noting its strong government support through guarantees and budgetary aid.
IRFC, as Indian Railways' main borrowing arm, funds crucial infrastructure and capex projects, ensuring timely debt payments and aligning with national development policies. IRFC had a total asset under management of ₹4,64,641.28 crores crore as of March 31, 2024.
Ircon International
Ircon International Limited commenced its business in 1976 as a railway construction company. It has diversified progressively since 1985 as an integrated engineering and construction PSU specialising in large and technologically complex infrastructure projects in various sectors, such as railways, highways, etc.
Shares of Ircon International hit a new high of ₹349 and rallied 10% from Monday with the addition of a contract order from Rail Vikas Nigam Limited. The company has been awarded LOA for the work of “Design, supply, installation, testing and commissioning of broad gauge ballastless track (BLT), supply of ballast and installation of track in connection with New BG line between Rishikesh and Karanprayag (125 km) in the state of Uttarakhand, India” through a Joint Venture. Ircon International had a healthy order book position of ₹ 27,208 crores crore as of March 31, 2024.
Bottomline
Government initiatives and robust capital expenditure plans are driving strong gains in railway stocks, with significant stock-specific developments enhancing investor confidence and pushing the sector to new heights.
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