RVNL Secures ₹116-Crore Railway Contract, Shares in the Spotlight

Shares of Rail Vikas Nigam Limited (RVNL) are in focus today as the company has received a new contract win from Central Railway, around the same time as the release of the firm's Q3 FY 2024-25 results. The state-owned entity was the lowest bidder of a ₹115.79 crore project under the Nagpur division of Central Railway.

Contract includes OHE (Overhead Equipment) modification works for conversion of existing 1x25 KV electric traction system to 2x25 KV in feeding system in Itarsi-Amla section. This is the upgrade of the railway line to get it to meet a target for loading of 3,000 MT. The project is expected to be completed in 24 months, RVNL said. Sandeep Kumar Gupta, Managing Director, IIL, said, "The contract is not awarded by a promoter or promoter group entity which the company confirm in its exchange filing that has no interest in the entity which has given the contract.

The thumb rule now remains RVNL will eventually acquire all the Railway projects and they will thrive on this by earning a high margin out-by-out and with thousands of projects coming up in the coming years. Importantly, the firm has also recently announced the awarding of ₹156.36 crore contract from South Western Railway and the ₹554.64 crore contract from NHAI for the construction of access controlled connectivity to Visakhapatnam Port Road. In Andhra Pradesh, the NHAI project will be implemented under a Hybrid Annuity Mode. Also, RVNL had on Friday received an order worth ₹156.35 crore from Southern Railway for engineering, procurement, and construction (EPC) of 2X25 KV OHE & PSI systems.

But this timely development on the contract side comes amid a backdrop of RVNL reporting a fall in its financial performance for the quarter ended December 31, 2024. It reported a YoY decline of 13. (1)% in net profit at ₹311.6 crore over ₹358.6 crore in the same period of the last financial year (FY24).

And RVNL's revenue from operations fell 2.6% to ₹4,567.4 crore in the October-December quarter, as compared with ₹4,689.3 crore in the same quarter last year. The firm's EBITDA, or Earnings Before Interest, Tax, Depreciation, and Amortisation was down 3.9%, dropping to ₹239.4 crore from ₹249 crore in Q3 FY24.

This was compared with RVNL on PwC's report of the new railway contract and reported decrease in profitability. The successful bid also demonstrates the company’s ongoing participation in major upgrades in important railway infrastructure, but the falling net profit and revenue will no doubt be scrutinised by investors. In the broader operational perspective of RVNL, execution of the modification work of OHE in Nagpur for improving the loading of the railways will be a strategic project to track over the next two years. Moving forward, the way this company handles its project pipeline and improves its financial metrics will be of utmost importance in the quarters ahead.

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