I hope my community had a grand New year celebration; now everyone is rejuvenated and back to business. So let’s continue our series of bonds and stocks. Today we will discuss the best railway stocks in 2023. Before that, we look forward to seeing how the future of Indian Railways looks in 2023. And which are those companies we think are suitable for you to pick in 2023 from the railway sector?
Future of Indian Railways
Indian Railway is run by the Ministry of Railways. This is the sector in which privatization has still not paved its path hence government monopoly still stands high. It is one of the largest and busiest networks in the world. It has a total length route of 68103km. Indian railways plan to create a future-ready railway system by 2030. As a part of NRP, the railway’s ministry is trying to electrify all routes by 100%, multi-track congested routes, upgrading speed to 160kmph on Delhi-Howrah and Delhi-Mumbai routes, elimination of all level crossings on all GQ/GD routes and upgradation of speed to 130kmph on all golden quadrilateral golden diagonal routes by 2024.
The government is also planning the reduce the transit time for freight trains by increasing their avg speed from 22kmph to 50kmph. Further, to reduce the overall cost of rail transportation by nearly 30% and pass this cost benefit to end consumers. Infusing capital into railway infrastructure resulted in zero rail accidents in 2019 as compared to previous years. This all was made possible by installing a dedicated freight corridor to boost transport, a mega block for maintenance, using modern machinery, eliminating all unmanned level crossings, modernization of signals, and delegating more power to field officers
With plans to massively invest $320 billion in improved connectivity and cost-effectiveness, IR is now on the threshold of a great future. With more functional autonomy, professional management, and efficient use of scarce resources and strategies, once a white elephant has turned out to be a real game changer.
Best Railway Stocks in 2023
With so much capital infusion and a transformation plan, we can bet on the future of Indian railways. Now we hear more good news about this sector than the worse one, so the future looks promising in the coming days. To diversify your portfolio, when banking or tech sectors don't perform as per expectation, railway stocks can give you cushioning in those bad times so now these stocks have started thriving. Let's get to the point of finding the curated railway stocks for 2023.
If you're an Indian then it's next to impossible that you haven't heard of this company. It provides online ticketing, and catering travel services and is one of the best railway companies in India. The company has a market cap of Rs.51320 Crore. It is almost debt-free and basis the sales growth in the past year after the recovery from the pandemic. The company is expecting to deliver a good quarter return. Still managed to deliver to give profit growth of 23.8# CAGR over last 5 years. Company giving an ROE of 31.6% over 3 years and maintaining a healthy dividend payout of 41.3%. Have improved from 161 to 111 days. Have a decent promoter share of 62.4% with FIIs and DIIs constituting 15.57%.
Rail Vikas Nigam
Rail Vikas Nigam is owned by the government of India. Primarily engaged in the business of rail infrastructure development by doing projects like doubling, gauge conversion, railway electrification, new lines, major bridges, and workshops. With these projects, the generated revenue will pass onto the Ministry of Railway. This company has got a high promoter share of 78.2%. The company has delivered good profit growth of 24.2% CAGR over the last 5 years. Reduced substantially the working capital requirement to 20.9 days from 92.3 days and gave a healthy dividend payout of 32.3%. The company falls under mid-cap stock as its market capitalization is around Rs.16586 Crore.
Jupiter Wagon Ltd
If you looking for a good fundamental company from a small cap then this stock could be your pick. The company manufactures metal fabrication comprising load bodies for commercial vehicles, rail freight wagons, and components. Have a market cap of Rs.4002 crores. Having promoter shares at 74.62% with little exposure to FIIs and DIIs at 2.19%. Registering good profit growth of 27.7% CAGR over the last 5 years. Therefore, expected to give good quarter results. Stock giving decent ROE of 7.59%.
Other than the above stocks, you can also pick stocks such as BEML, IRFC, and Texmaco Rail & Engineering Ltd. These are the stocks I have chosen from each cap depending upon the risk one is ready to take in 2023.
The policy seeks to entice private sector investment in rail connectivity projects in order to increase rail transport capacity. The policy allows for four different models:
a) Freight Rebate for Cost Sharing.
b) Apportioned Earnings with Full Contribution.
c) Multipurpose Vehicle (SPV).
d) Personal Line.
The Indian Railway is building a broad-gauge freight corridor in India. It is a high-capacity railway corridor dedicated solely to the transport of goods and commodities. The Dedicated Freight Corridors are expected to be a game changer for India's logistics sector and will play a significant role in increasing the Railways' modal share of freight in India. These corridors' key features include double speeds, increased load-carrying capacity, and double stacking capability.