00:00 Thanks so much for tuning into this conversation with Railtel. They came out with a quarter
00:03 one number, which by their own expectations that the market would have had, may have been
00:08 a bit underwhelming. But the questions to, but a lot of people actually say that the
00:12 way to look at these companies is actually the opportunity size and not necessarily what
00:16 they're doing quarter by quarter. Mr. Sanjay Kumar, who heads Railtel, joins us right now
00:20 with his thoughts of what could be happening within this space, how to look at it. Mr.
00:25 Kumar, great having you. Thanks for taking the time out.
00:28 Thank you. Thank you, Mr. Neeraj. The pleasure is ours. Can we just throw a quick
00:32 light on the quarter? I mean, were you satisfied or would you believe you would have done slightly
00:36 better operationally and on the execution side? Yeah, we are very well satisfied and
00:43 there's some seasonality in our delivery in Q1 generally. It has been there past few years
00:51 also. So we are very much satisfied with our performance.
00:55 Okay. Let's talk about the opportunity size because there are a lot of messages floating
00:59 around and it would be great to understand from you, how do you envisage this? So before
01:04 I get into specific announcements, could you tell us, sir, with the current slate of operations
01:10 that you are doing and the avenues that you are tapping into, what are the areas within
01:15 this whole railway ecosystem that Railtel stands to work over the course of the next
01:22 three to five years? Okay. So see, one is very much where we were
01:29 not very much present is signalling and we are slowly making heads into signalling modernization
01:37 projects of railways. Of course, those are not coming now on nomination. So we have to
01:43 compete and we are continuously interacting with the OEM partners, especially Kavach,
01:49 which is very much talked about nowadays. And the second is LTE where Railtel has very
01:55 strong foothold as far as railway projects is concerned because we already own a very
02:00 strong optical fibre based communication along the railway track. So these are the two primary
02:07 area. Third is now there is a requirement of AI based centralised traffic control also
02:16 in railways. And we being an IT company, we are also eyeing such projects which might
02:25 come up in next two to three years from now. We were already doing some projects, IT governance
02:32 type of projects that you are aware, e-office, hospital management, information system, predictive
02:38 maintenance practices and all that. We are working already there. So this is the railway
02:43 front if you talk of. Got it. Are you trying to do something beyond this as well or will
02:49 this kind of capture all your capacities? No, no, no, no. There is no end. Since we
02:54 are working in a framework where we work with partners, collaboration with the industry,
03:02 so then we can expand to any extent. Are you looking to do that? Yes, yes, we are already,
03:09 we are already in not only in railways, but outside railways, we have more than around
03:16 250 plus business associates who are already associated with us for delivering various
03:23 projects which are related to IT or ICT, maybe in health, education, coal, smart city, data
03:32 centre and all. Got it, sir. Where to your mind do you see the largest opportunity size?
03:38 And I'll come to specific numbers and announcements as well. But from your vantage point, non-railways
03:43 a lot of associates, the three segments that you spoke about, maybe something else as well.
03:48 Where is the largest opportunity size five years out? Or let's say over the course of
03:53 the next five years? Yeah. So railways, signalling, modernising projects, of course, is one major
04:00 opportunity which we are eyeing. There are other possibilities in signalling sector itself
04:06 because there's very little trained manpower in this sector. So we are getting into competency
04:13 development kind of area also. And not only this, because RDSO, our Railways Standardisation
04:24 Organisation is working on specifications which will be one day equivalent to ETCS
04:29 Level 2, which is European standard for modern signalling. And once that has come out, so
04:35 there is always possibility for export of this technology outside the country, especially
04:40 in South East Asian countries where such opportunities, such potential is very high.
04:45 Got it. No, I mean, you know, we all feel very proud these days when we see this change
04:52 in the state of railways and the modernisation that is happening, not just in the wagon,
04:56 but beyond as well. So I would love to understand what is the opportunity size here? Various
05:01 people quote some very different numbers, Mr. Kumar. I would love to understand from
05:05 you how do you look at this opportunity size and how much of that pie could rail tail potentially
05:11 capture?
05:12 See, if I talk of total kitty is available is around 1 lakh crore rupees, which is connected
05:23 to these projects over next six to seven years, which is part of National Railway Plan. So
05:33 out of that, Kavach and LT put together is around 30,000 crore and rail tail, very, I
05:43 would say conservative number, if I say it's it can be easily very easily 4 to 5000 crore,
05:48 which is very, very conservative number. And once we are successful in having some
05:56 partnership with OEMs, especially in Kavach, we certainly will scale these numbers to a
06:03 much higher number, maybe 10 to 12,000 also.
06:06 Okay, so that is possible.
06:08 That number is not right now, but at least I am sure that 4 to 5000 crore from Kavach
06:13 itself. Other modernization projects like mechanical signaling to electromechanical,
06:19 then electromechanical to electronic interlocking. These are the other projects which are covered
06:26 under 70,000 crore. Automatic signaling, then track circuiting, Excel counter and all those
06:35 things.
06:36 Okay, so you're saying that out of the 30,000 crores, you could conservatively get up to
06:42 5, you could even go up to 10 to 12 and then remaining 70, sorry, I didn't get that. You
06:46 believe there is some pie to capture from there as well?
06:50 Yes, of course. We will scale our capabilities over and over as we gain experience and gain
07:00 momentum also.
07:01 Got it. The other thing, sir, is about this whole conversation around BFC starting to
07:08 go ahead for the commercial container, train standard. There is a newspaper report today
07:14 about how the railway board apparently is going to make an application for CAPEX worth
07:20 5 lakh crores, so on and so forth, which is I'm saying there are various numbers. Could
07:23 you tell us about the opportunity within this whole commercial container, etc. Is the rail
07:29 tail playing a part there at all?
07:31 See, there are several other opportunities where states are also participating in activities
07:37 like government of Assam is nowadays considering logistics depots and there is because there
07:48 is an IT element in such logistics depots. So, we are thinking to work in that also and
07:57 maybe we succeed. We have started thinking in that direction also. It's not only signaling
08:03 or communication, even beyond because IT plays a major role in all modernization. So, we
08:09 see certainly a bigger role.
08:12 What is your right to win, sir? I mean, because it's a B2G contract, you reckon that you being
08:17 a trusted name, you would get the preference or is there competition or is there large
08:22 competition within that as well?
08:23 You cannot satisfy yourself by remaining a creditable or can be, you have to sustain
08:38 also. So, we are sure that we will continue to ride the curve and then certainly such
08:44 kind of projects will come to us by way of delivery and all that.
08:52 There was also an article that I read which said that you will have the first right or
08:56 it will be yours to lose any kind of optic fiber laying across all of the railway line
09:04 or railway tracks that may be and that is also turning out or could turn out to be an
09:08 opportunity. Any thoughts there?
09:11 So it's otherwise actually. Earlier we were enjoying exclusive right of way. Now that
09:16 right of way has been announced, has been opened to even other telcos, but it's very
09:23 difficult to maintain, create such a high, such a big network, which because we have
09:30 right now we have around 61,000 kilometers of network. Laying cable and maintaining it
09:35 along the railway track is very difficult because we know the ins and outs of railways.
09:40 So we are able to do that. So we don't see any threat from that, at least.
09:49 In which case, sir, I would love to understand all of these opportunities combined with you
09:54 at the helm and I'm sure a very strong team backing this as well. What is the kind of
10:01 growth that you envisage? Again, let me put this into perspective. When we see the private
10:06 sector companies, be it into wagons, into wheels, into other forms of railway infrastructure,
10:14 their order books are going through the roof. Their projections about what they can do just
10:19 domestic is also very high. And then they talk about the same export opportunity that
10:24 you spoke about as well. Now I'm trying to understand, we're sitting at the start of
10:28 F524, so to say, four months gone, but give or take at the start of F524, the next five
10:33 years with the kind of spend that is happening, what is the kind of growth rate that would
10:38 satisfy you as somebody who is leading rail?
10:42 So if you talk of next five years, I can, if my plans, my team's hard work is really
10:51 working, I'm sure that we should cross at least 10k number, 10,000 numbers, 10,000 crore
11:01 within the next five years.
11:02 You're talking about annual revenue size?
11:05 Yes.
11:06 Okay. And with this large execution and ordering and revenues, would operating leverage come
11:15 into play? I'm trying to understand, or would you kind of operate at a similar kind of operational
11:19 metrics?
11:20 We see, because projects segment will increase and telecom as a part of total kitty will
11:31 be a little much, little, much lesser. So naturally our operating numbers, if we talk
11:39 of EBITDA or PAT, all those numbers will certainly get affected because any projects, it's very
11:47 difficult to take them 6 to 7, 8% beyond. So certainly EBITDA margins will come down.
11:54 I think that is your question.
11:56 Yes, that is my question. So from 16% or that you enjoyed in quarter one, you reckon you
12:02 could drift down to maybe higher single digits?
12:05 So we were, I think 18% in Q1. So that number will certainly be a single digit after five
12:16 years, not now, because now we are, if we talk of projects, because projects now we
12:22 have an advantage here because our projects will be IT related and there will be ICT elements.
12:29 So there'll be telecom element in there. So that will certainly support us.
12:34 Got it. So the next one to two years, you might still enjoy these high margins and then
12:38 you will start drifting lower, maybe.
12:41 Let us see. We will try to, we are trying to scale our telecom capabilities, deliveries
12:45 also, but that is not likely to grow at the same pace.
12:50 Got it. One last question, sir. Would there be any kind of additional fundraising that
12:58 needs to be done for executing the kind of orders that we are talking about?
13:05 I do not think so right now. For next two to three years, I do not see, but if we find
13:11 any opportunity where we need fundraising, we will certainly not hesitate. We will do
13:15 that. We are open to that.
13:18 Got it. Okay. Love talking to you, sir. Thank you so much for taking the time out and giving
13:23 us an overview. And all the best for the quarter's end.
13:27 Have a good day. Thank you.
13:29 Thank you. And viewers, thanks for tuning in.
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