Thursday, March 20, 2008


Type of Issue : Book Built
Issue Opens: 24 March, 2008
Issue Closes: 27 March, 2008

Issue Size : 2,383,768 (No. of Shares)

Lower Price Band: Rs.540
Upper Price Band: Rs.610
Total Issue Size: Rs.145 Crores

Application Multiple: 10 and in multiples there off starting with atleast 10 shares.

Maximum Shares: 160(for Retail)

Information URL :
Prospectus URL :

Company Details :


Tel : 913322834467
Fax : 913322891655
Email :

ISSUE Description:

The company is engaged in the manufacturing of railways wagons, bailey bridges, heavy earth moving and mining equipments and steel and S G Iron castings of moderate to complex configuration with its two plants at Titagarh and Uttarpara, both in West Bengal. The company has been posting consistent financial performance year after year with FY 07 topline at Rs.284 crores with PAT of Rs.29.18 crores, resulting in an EPS of Rs.20. For six months ending 30-09-07, the total income of the company was at Rs.212 crores with PAT of Rs.24.30 crores. Generally, second half of the company is always better and hence FY 08 may see a topline of Rs.480 crores with PAT of Rs.58 crores, which may translate into an EPs of Rs.31.50 for the year. The present equity of the company of Rs.16.37 crores would rise to Rs.18.44 crores.

Presently there are 10 wagon manufacturers in India, of which, 4 are in public sector and 6 are in private sector. Indian Railways is planning to purchase 20,000 wagons in FY 09 against target of 11,000 wagon in FY 08, as per the recent railway budget. Wagon Investment Scheme introduced by the Railways from 1st April 2005, in place of Own Your Wagon Scheme also boosted the demand for wagons by the players using rakes for transportation of commodities on a regular basis.

Wheelsets are most critical component in wagon manufacturing, which are made in India by two manufacturers, both being PSUs. The company, therefore, to improve the wagon manufacturing capacity is setting up an axle machining and wheelset assembly facilities. The company would procure loose machined wheels and rough axles and shall undertake the machining, drilling, and tapping of the axles and hub machining of the wheels and shall press the wheels on to the axles to make them into wheelsets. This capacity is likely to be about 10,000 – 12,000 wheelsets per annum.

The comparable listed peer for the company is Texmaco Ltd., which is now ruling at Rs.1,300. Texmaco is likely to have a topline of Rs.700 crore, with PAT of Rs.55 crores, translating into an expected EPS of Rs.55 for FY 08, on an equity of Rs.10.44 crores. Book value per share of Texmaco is likely to be Rs.200 as at 31-03-08. This means share is presently ruling at a PE of 24 for Texmaco.

While comparing Titagarh with Texmaco, its book value post issue, would be close to Rs.200, if shares are issued at Rs.610 per share. The same would be at Rs.192, if shares are issued at Rs.540. Considering an expected EPS of Rs.31 for FY 08, share at the upper band is issued at a PE multiple of close to 20. Even post issue stake of promoters at 49% is close to 53% of Texmaco. FII stake of 38% in pre-issue instills confidence.

Considering the increase in purchase of wagons to 20,000 in the recent railway budget, the company would be having larger share and may continue to have 27% share of the enlarged orders of Indian Railways. Even procuring loose wheels and axles would improve its wagon capacity.

The company plans to utilize the proceeds for various purposes like modernising and expanding the existing facilities at Titagarh and Uttarpara units, setting up an EMU manufacturing facility at Uttarpara unit , setting up an axle machining and wheelset assembly facility at Uttarpara unit, Brand building exercise, constructing a corporate office and a design cum research and development office, general corporate purposes and strategic and acquisition or investments.

Titagarh Wagons manufactures special purpose wagons, shelters and other engineering equipments. The company also manufactures and markets special purpose wagons to suit the varying needs such as Merry Go Round wagons and special wagons for the Indian Defence establishment. The Company has two manufacturing facilities located at Titagarh and Uttarpara in West Bengal.

Share at lower band of Rs.540 is quite attractive and at the upper band of Rs.610 also, leaves room for gain, as FY 09 performance of the company would be quite good. The sector of the company enjoys very good discounting on the bourses and hence investment is recommended in the issue.