The shares of this public-sector enterprise gained 1.4 percent after the company received a letter of award from Ntokoto Rail Holdings Pty. Ltd, worth USD 5.40 million.
With a market capitalization of Rs 14,523.85 crore, the shares of Rites Ltd were trading at Rs 302.20 per share, increasing around 2.25 percent as compared to the previous closing price of Rs 295.75 apiece.
Reason for rise:-
The shares have seen positive movement after Rites Ltd received a letter of award from Ntokoto Rail Holdings Pty. Ltd from Ntokoto Rail Holdings Pty. Ltd. for Supply and commissioning of overhauled in-service Cape Gauge ALCO Diesel Electric Locomotives fitted with new Cape Gauge Bogies, Traction Motors, Control System Air braked, etc. overhauled at the nominated facility and on-site warranty support for one year. The order is valued at USD 5.40 million.
Financial Analysis:-
Examining the company’s financial performance, revenue plummeted by 11 percent from Rs 544 crore in Q4FY23 to Rs 486 crore in Q4FY24, and during the same time frame, net profit shrunk by 25 percent from Rs 120 crore and Rs 90 crore.
Key Challenges:-
The company experienced a drop in export revenue from ₹35 crores in Q1 FY24 to nearly nil in Q1 FY25, alongside a ₹25 crore decline in revenue from the Quality Assurance (QA) business with Indian Railways. These challenges led to a net impact of ₹60 crores.
Order Book:-
The order book grew by 11% from ₹31,000 crores on March 31 to ₹30,000 crores on June 30, with around ₹1,300 crores in new orders across sectors like rail infrastructure, highways, buildings, tunnels, and airports. Recent quarters show a significant increase in order intake, reaching ₹3,000 crores compared to ₹600 crores in the previous fiscal year’s first half.
Margin Guidance:
The company anticipates consultancy EBIT margins to stabilize at around 40%. Turnkey project margins are projected to average between 2% and 3%, fluctuating by quarter based on execution stages. Management noted that margins are unlikely to return to previous levels due to increased competition and altered order acquisition strategies.
Management recognized challenges from decreased government CapEx growth but remains optimistic about securing private orders. Despite a muted Q1 performance, there is confidence in sequential improvements in revenue and margins as execution ramps up in the coming quarters, indicating potential for recovery.
Export orders:-
The company secured two major export orders: ₹900 crores for 200 coaches from Bangladesh and ₹300 crores for 10 locomotives from Mozambique. Revenue from these orders is anticipated to begin in Q1 FY26, with efforts to ship some products by the end of FY25.
Management guidance:-
Management emphasized a dual strategic focus on the rapid execution of the existing order book and aggressive bidding for new domestic and international orders. This approach aims to sustain the trend of securing approximately ₹3,000 crores in new orders each quarter.
Company Profile:-
RITES Limited is an Indian engineering and consulting firm. The company provides a wide range of transportation infrastructure and related technology services, from idea to completion. It operates in four segments: consultancy services, leasing of railway rolling stock and equipment, and export of rolling stock, equipment, and others.
Written by:- Abhishek Singh
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