Budget 2023 had an allocation of Rs. 2.4 lakh crores solely for railways. This is touted to be the highest-ever allocation for this sector and approximately 9 times the outlay made for railways in the budget of 2013-14. This huge allocation has many investors (domestic and international) bullish on railway stocks, making it one of the top choices in investment portfolios. So do you also feel the buzz around railways increasing too? Check out the top stocks in this sector as investment options and an overall analysis of the railway sector as a whole.
Read More: Top Defense Stocks in India
Top stocks in Railways
The list of the top stocks in the railway sector and their key details are mentioned hereunder.
IRCTC
IRCTC, established in 1999 under the Ministry of Railways, is responsible for enhancing catering and hospitality operations within the Indian Railways network. Since its IPO in 2019, the company has achieved a remarkable 287% return. IRCTC operates in various segments, including packaged drinking water, internet ticketing, travel and tourism, and catering (known as Rail Neer). It offers flight and hotel bookings, rail Drishti for train-related information, e-catering, bus services, vacation packages, tourist trains, and more. IRCTC’s mobile app and website allow users to book tickets, hotels, and plan tours, featuring the IRCTC Zone, iPay Payment Gateway, Wallet, and loyalty program.
The key details of this company are tabled below. Figures as of July 09, 2023
| Category | Details |
| Market Capitalization | Rs. 50,424 crores |
| PE Ratio | 50.13 |
| Return on Equity | 42.66% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 62.40% |
| Share price | Rs. 630.65 |
| Dividend Yield | 0.87 |
The trailing returns of IRCTC are tabled below
| Period | Trailing Returns |
| 1 year | 9.24% |
| 3 years | 31.06% |
| 5 years | – |
| 10 years | – |
Container Corporation of India
Container Corporation of India Limited (CONCOR) was established in March 1998 and commenced operations in 1989 when the Indian Railways transferred a network of seven inland container depots to the company. It is primarily owned by the Government of India, but there are plans to privatize the listed public sector undertaking (PSU). CONCOR is a holding company primarily involved in the rail and road transportation of containers. It operates in two divisions, namely Domestic and EXIM, which handle transportation, warehousing, and logistics activities. CONCOR manages logistics facilities such as dry ports, container freight stations, and private freight terminals. Its services include air cargo movements, bonded warehousing, reefer and cold chain services, and factory stuffing and de-stuffing.
The key details of this company are tabled below. Figures as of July 09, 2023
| Category | Details |
| Market Capitalization | Rs. 40,929 crores |
| PE Ratio | 34.84 |
| Return on Equity | 10.35% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 54.8% |
| Share price | Rs. 670.65 |
| Dividend Yield | 1.64 |
The trailing returns of CONCOR are tabled below
| Period | Trailing Returns |
| 1 year | 3.11% |
| 3 years | 15.83% |
| 5 years | 5.18% |
| 10 years | 10.71% |
Indian Railway Finance Corporation(IRFC)
Indian Railway Finance Corporation (IRFC) is the financing arm of the Ministry of Railways in India incorporated in 1986 and has 86.4% government holding. Its primary objective is to raise funds at lower costs to support the railway sector. IRFC raises funds for entities such as Rail Vikas Nigam Limited (RVNL), Konkan Railway Corporation Limited, Rail Land Development Authority, Railtel Corporation of India, and Pipavav Railway Corporation. IRFC operates in the Leasing and Finance segment, focusing on lending, borrowing, and leasing activities. IRFC lends to organizations under the Ministry of Railways and leases national projects and railway infrastructure assets. Its primary business involves the financial leasing of various rolling stock assets such as coaches, wagons, trucks, electric multiple units, containers, cranes, and other railway components.
The key details of this company are tabled below. Figures as of July 09, 2023
| Category | Details |
| Market Capitalization | Rs. 43,244 crores |
| PE Ratio | 6.82 |
| Return on Equity | 14.24% |
| Debt Equity Ratio | – |
| Promotor’s Holdings | 86.36% |
| Share price | Rs. 33.10 |
| Dividend Yield | 4.53 |
The trailing returns of IRFC are tabled below
| Period | Trailing Returns |
| 1 year | 65.91% |
| 3 years | – |
| 5 years | – |
| 10 years | – |
Rail Vikas Nigam
Established in 2002, Rail Vikas Nigam Limited is a government entity responsible for implementing railway infrastructure projects in India. It focuses on track installation, upgrades, electrification, bridge construction, workshops, production units, and metro rail projects. RVNL addresses the infrastructure deficit by reinforcing the Golden Quadrilateral through new lines, doubling, electrification, and bridge construction. They manage projects from conceptualization to commissioning, including design, estimation, contract management, and successfully executed projects like Diva-Kalyan 5th and 6th Lines, Gurup-Saktigarh Ext of 3rd Line, Jakhapura-Haridaspur 3rd Line, Karjoda-Palanpur Doubling, and Civil Engineering Works for Diesel Loco Component Factory, Dankuni.
The key details of this company are tabled below. Figures as of July 09, 2023
| Category | Details |
| Market Capitalization | Rs. 25,427 crores |
| PE Ratio | 17.90 |
| Return on Equity | 17.59% |
| Debt Equity Ratio | 0.82% |
| Promotor’s Holdings | 78.20% |
| Share price | Rs. 121.90 |
| Dividend Yield | 1.75 |
The trailing returns of RVNL are tabled below
| Period | Trailing Returns |
| 1 year | 300.99% |
| 3 years | 81.76% |
| 5 years | – |
| 10 years | – |
RITES
RITES Limited is an Indian engineering and consulting firm specializing in transportation infrastructure. It offers services in domestic and international consultancy, leasing, turnkey construction projects, power generation, and more. RITES serves clients in rail, highway, airport, port, ropeway, urban transport, and inland waterway sectors across 55 countries. The company has diversified into road infrastructure, urban planning, ports, and airports. Their services include project management, construction supervision, quality assurance, operations, and maintenance, as well as leasing and export of rolling stock.
The key details of this company are tabled below. Figures as of July 09, 2023
| Category | Details |
| Market Capitalization | Rs. 9,082 crores |
| PE Ratio | 16.76 |
| Return on Equity | 21.98% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 72.2% |
| Share price | Rs. 377.90 |
| Dividend Yield | 4.37 |
The trailing returns of RITES are tabled below
| Period | Trailing Returns |
| 1 year | 60.16% |
| 3 years | 11.67% |
| 5 years | 19.10% |
| 10 years | – |
Railway – Sector Overview
Indian Railways, the fourth largest network globally, is being revamped and modernized by the government to ensure efficient passenger and freight transport. The aim is to increase railway and track infrastructure, electrify all tracks by 2023, and invest Rs 50 lakh crore ($715.41 billion) by 2030. Vande Bharat Trains and increased exports contribute to the country’s GDP. Revenue growth in the third quarter of FY23 was $5.21 billion. Indian Railways is set to become the third largest network globally, representing 10% of the global market. The railway system is exploring alternative revenue generation avenues.
- Modifying the configuration of coaches to promote the more lucrative AC coach travel
- Capitalizing on the digital booking platform IRCTC to create additional revenue streams
- Considering disinvestment options for IRCTC.
Conclusion
The Indian railway industry is poised for a transformative revolution, with potential developments such as stake sales and the introduction of high-speed trains. The projected expansion and modernization of India’s railway infrastructure create a favorable environment for investors looking to capitalize on the industry’s growth. Stake sales, which involve selling a portion of government-held shares in railway companies, can attract private investment and inject fresh capital into these entities fueling growth and expansion as well as operational efficiency.
FAQs
The permissible FDI in the railway sector is up to 100% from the automatic route for construction, operation, and maintenance of suburban corridor projects.
Indian Railways is projected to contribute or account for approximately 40% of the global share of rail activity by 2050.
IRCTC is the largest company in terms of market capitalisation in the railway sector.
IRCTC is a government unit under the MInistry of Railways of Indian Government and is also known as a Mini Ratna.
