Titagarh Rail Systems shares were trading one percent higher on Monday. The stock has given 37 percent returns over the last one month but it is down by nearly 22 percent over the last six months. Titagarh Rail Systems Limited’s management engaged in a detailed conversation with analysts and investors during its Q4 and full-year FY25 earnings call. The company highlighted record production in both freight wagons and foundry output, despite being hampered by wheelset shortages in recent quarters. Management expressed optimism about normalization of wheelset supply from June 2025, and outlined aggressive expansion plans for its foundry and passenger rail segments. The call underscored robust order books, upcoming tenders, and transformative growth in propulsion systems, metro and Vande Bharat coach production, as well as a strategic reentry into shipbuilding. Key concerns addressed included supply chain bottlenecks, margin pressures, and execution timelines across its diversified business verticals.

Wheelset Supply Headwinds Nearing Resolution

Operational Challenges and Recovery Timeline: For much of FY25, Titagarh Rail Systems grappled with limited wheelset availability from the Rail Wheel Factory in Bangalore. This constrained its monthly output target of 950–1,000 wagons. However, management has signaled a return to normalcy by June 2025, which is expected to smoothen production schedules and restore momentum.

Record-Breaking Annual Output: Despite the supply issues, the company delivered a record 9,431 wagons in FY25—the highest ever in a single year for both Titagarh and the broader Indian rail manufacturing industry.

Foundry Capabilities Expanding at Full Steam

Volume Milestone Achieved: The internal foundry recorded production of 27,240 metric tons in FY25. Management underscored backward integration as a key lever for enhancing cost control and de-risking the supply chain.

Capacity Ambitions: A new state-of-the-art facility is under development to scale annual output to 40,000 metric tons. The company expects to hit this capacity on a monthly run-rate basis within the current fiscal year.

Passenger Rail Operations Scaling Up

Initial Hurdles and Recovery: The passenger rail division encountered early delays stemming from technology transfers and visa-related issues with Chinese partners. These hurdles have now eased, with component supplies stabilizing.

Production Milestones:

• First Bangalore Metro train dispatched in December/January 2024–25.
• Ahmedabad Metro car body production began in March 2025.
• Vande Bharat assembly started in April 2025.

Management projects the first Ahmedabad Metro delivery by Q2 FY26, and Vande Bharat deliveries commencing by Q4 FY26 or Q1 FY27.

Propulsion Systems: A High-Voltage Opportunity

Traction Motor Ramp-Up: The propulsion business, still in its infancy, delivered 636 traction motors in FY25. Plans are in motion to scale to 125–150 units per month, or 1,500–1,800 annually.

EMU Propulsion Progress: A prototype is in the final stages of testing and RDSO approval. The first EMU unit is expected to roll out in Q1 or early Q2 FY26. The division currently holds an order book of Rs 400 crore, with more tenders in progress.

Emerging Verticals: Signal Systems and Shipbuilding

Reentry into Safety & Signaling Systems (SSS): The company has reentered this segment, aiming to bid for tenders and explore technology collaborations and JVs. While still nascent, management sees strong demand potential in the metro and railway sectors.

Shipbuilding Relaunch: The maritime vertical has been relaunched in response to India's push for naval self-reliance. Titagarh has secured land in Falta, which resolves prior airspace constraints and enables larger vessel construction. A dedicated board sub-committee is in place to shape this strategic direction.

Robust Order Pipeline and Market Outlook

Year-Full Order Book: The company’s current order book offers full-year visibility, with management indicating that upcoming tenders later in FY26 could further augment volumes.

Private Sector Demand Outlook: While the temporary moratorium on the wagon investment scheme has slowed private orders, its anticipated reinstatement could boost volumes significantly. For now, Indian Railways accounts for 80% of procurement.

Metro and Vande Bharat Manufacturing Plans

Production Goals: Titagarh aims to scale coach production to 20–25 units per month by FY26-end and reach 40–50 units per month in FY27. Management estimates revenue at Rs 10 crore per coach.

Opportunity Funnel:

• Metro Coach Pipeline: Rs 15,800 crore
• Vande Bharat Coach Pipeline: Rs 72,000 crore

Management expects significant allocations to private players, though government procurement policies will influence actual awards.

Revenue Projections for Propulsion

Outlook: Titagarh forecasts:

• Rs 300–400 crore annually from traction motors (2,000 units/year)
• Rs 500–1,000 crore from EMU/MEMU and related propulsion systems

The business is expected to reach Rs 1,500 crore in annual revenue within 2–3 years.

Execution Timelines Across Verticals

Freight Wagon Orders: Typically fulfilled within one year.

Passenger Rail and Joint Ventures: Longer timelines apply, particularly for high-spec projects like Vande Bharat. The wheelset JV with Ramakrishna Forgings is also structured for long-term execution.

Metro Coach Production: Once stabilized, the production cycle—from sheet cutting to final rollout—is expected to span 60–90 days.

Profitability and Margins Across Divisions

EBITDA Margin Trends: Consolidated EBITDA margins rose to 10.4% in Q4 FY25, up from 9.44% in the prior quarter. While the passenger segment saw some margin compression, it did not affect overall performance significantly.

Firema Exposure: Management clarified that any impairment from the Titagarh Firema stake would be limited to its book value, with no incremental downside risk.

Shipbuilding Focus: Strategy, Not Short-Term Revenue

Long-Term Bet: While revenue contributions are not yet material, the company views shipbuilding as a strategic growth avenue. Facility development and strategic frameworks are currently being put in place.

Wheelset JV: High-Capacity and Committed Buyers

Scale and Commitments: The JV aims for an annual output of 220,000 wheels, with 80,000 wheels already committed by Indian Railways. Each unit is priced around Rs 1 lakh.

Management Outlook: Preparing for Hypergrowth

FY26–FY27 as Catalysts: Management has dubbed these as “transformational years,” with the passenger rail division expected to drive revenue, supported by growth in propulsion and shipbuilding.

Macroeconomic Tailwinds: The government's continued emphasis on urban mobility and infrastructure—particularly metro and high-speed rail—offers a favorable policy backdrop for Titagarh’s expansion goals.

Investor Dialogue: Key Concerns Addressed

• Wheelset Constraints: Supply to normalize from June 2025, mitigating recent disruptions.
• Segment Margins: Analysts flagged soft passenger segment margins; management confirmed overall profitability remains on track.
• Execution Risks: Management emphasized detailed plans and strong vendor relationships.
• New Ventures: Shipbuilding and signaling systems are being developed with a long-term view, including potential technology alliances.

Conclusion: Momentum, Vision, and Infrastructure Alignment

With record-setting deliveries, well-funded expansion plans, and tailwinds from national infrastructure priorities, Titagarh Rail Systems is moving full steam ahead. As new verticals like propulsion systems and maritime manufacturing scale up, the company is evolving into a multidimensional player in India’s mobility landscape. For investors and stakeholders alike, the coming quarters could very well define Titagarh’s ascent from a specialized manufacturer to a diversified transportation conglomerate.