RITES Ltd, the engineering consultancy arm of Indian Railways, is aiming to increase the ratio of export in total revenue from under 1% now to 20-25% in the next three years and sustain it at that level, chairman and managing director Rahul Mithal told FE.
“In the past 9-10 months, we’ve received orders worth Rs 1,300 crore (largely of exports), which are substantially above the trend in the past four-five years,” Mithal told FE. “Since most of these orders are linked to locomotives and coaches, the revenues will start reflecting in our results from next fiscal year.”
The navratna PSU’s main focus is now on increasing its footprint in about 12 African countries–such as South Africa, Zimbabwe, and Mozambique–as well as Bangladesh, and South America. “We’re navigating the evolving business scenario, and I think we’ll have a major focus on rolling stocks exports in the near term,” said the Chairman.
Meanwhile, on the sharp decline in revenue and profits in H1FY25, Mithal said in the current fiscal, RITES is aiming to reach the same levels as that of FY24 in FY25. The decline is on account of the massive hit the company has taken on its consultancy business.
In H1FY25, the company’s total revenue, on consolidated basis, has declined 8.6% on year, to Rs 1,070 crore. And on standalone terms, it has fallen by 8.3% to Rs 1,029 crore. Revenue from consultancy–which has a share of about 50% in total–has declined 8.4% on year in the first half, and by 7.4% in Q2FY25.
“The fall is a consequence of massive decline in quality assurance (QA) business, and not so much from project consultancy,” Mithal said. “But we have received new consultancy orders, and that would add to the numbers starting FY26 onwards…in fact, we’ll see a jump in the same period of next year,” he said. In Q2FY25, revenue from quality assurance has fallen by 22%, and in H1 by 14%, while from project consultancy, the decline has merely been 2%.
RITES, along with other PSU consultancy companies, have recorded year-on-year decline in consultancy revenue and margins from FY24, specifically due to change in method of allocating projects from Indian Railways.
“For five decades, prior to FY24, RITES was the nominated agency for the Indian Railways for Quality Assurance projects, which was revised to a competitive bidding method in early FY24. This caused a downfall in overall consultancy revenue and margins,” said Mithal. “The rates of QA projects have fallen dramatically, and our share in allocation through bidding is also reduced now. So, the margins have reduced,” he explained.
On adding headcounts, Mithal said so far in FY25, RITES has added 200 net employees, which reflects its optimism in securing more orders and improving its revenue and profits. “In today’s time, when many companies are looking at downsizing, we are building up our bench strength. Because we’re confident that this trend (of new orders) will continue,” he added.
From: financialexpress
Financial News
