Archana Shukla

Mumbai: RITES Ltd, a state-owned consultancy firm, is eyeing the railway equipment leasing business as its next big growth opportunity in the international market.

The Indian Railways subsidiary is planning to leverage the railway projects it is running on concession in Africa for increasing returns from the leasing business.

V K Agarwal, managing director, RITES said, “Leasing is a big market in Africa, as the mineral-rich continent requires development of railway infrastructure for the movement of minerals.And it is here that we see an opportunity.”

Rajeev Mehrotra, director-finance, RITES, said, “The leasing business is picking up, and as it grows there would be a shift in revenue contribution from exports to leasing.”

Currently, leasing contributes about 5% to the company’s revenues, as against 50% by exports of railway equipment.

RITES is currently operating a railway system under a 25-year concession agreement in Mozambique, where it is the lead consortium partner in building 800 km railway line for a total cost is $200 million. It is also developing 2,700 km railway network in Tanzania.

Since the company has the concession agreements, it can plan for equipment easily, as leasing would be tied up. Mehrotra said, “Instead of raising further debt for our Tanzania or Mozambique concession project subsidiaries, we would lease low-cost locomotives, wagons and coaches from India. This would get us a stream of leasing income in the years to come.”

RITES is likely to come up with an initial public offering in June and has already lined up an investment of Rs 350 crore, half of which would be used for the leasing business. “We plan to utilise Rs 194 crore as a capital investment for procuring railway equipment for leasing, as the concessions outside are owned by us,” Mehrotra said.

The company has also lined up Rs 18-crore investment for buying spares of the equipment it leases. Total income of the company in FY08 stood at Rs 557 crore.

Source : DNA