>INDIA INFRASTRUCTURE (BNP PARIBAS)

Railways: on the right track
We attended the IndiaRail 2009 conference in New Delhi on 12 May 2009. The key speakers at the conference were policy makers and industry representatives. The agenda of the conference was to discuss opportunities in the sector.

Opportunities galore …
Opportunities in the sector are close to INR2.7t over the next five to eight years, of which the INR800b-900b will be awarded in the next two years. The Dedicated Freight Corridor (DFC) is the largest opportunity worth INR680b. Other areas of opportunities include station modernization, port connectivity, gauge conversion, rolling stock and logistic parks. The Railway budget for 2009-10 has earmarked INR379b (compared to INR367.73b for 2008-09 revised estimates). Major beneficiary in our coverage from these investments is Larsen and Toubro, which we believe will benefit from its latest venture into the railways segment. The company also has investments in Kalindee Rail Nirman (Engineers) Limited (owns 14% of the company) that specializes in track and signaling systems.

… but challenges remain
We believe land acquisition is the most significant challenge, which could delay project implementation. Other key challenges highlighted by the industry representatives were related to inability of Indian players to execute projects on a turnkey basis due to obsolete technologies.
Shortage of trained engineers and suppliers is another impediment. However, these impediments may not materially affect the overall investment rationale.

Key takeaways
■ Increased focus on investments through Public Private Partnerships
■ Thrust on Dedicated Freight Corridor (DFC)
■ Major beneficiaries – rolling stock manufacturers, players offering track and signalling technologies, logistic & construction companies
■ Financing for the DFC from Ministry of Railways’ internal generation, budgetary support, multilateral and bilateral agencies, private investments and market borrowings.


To see full report: INDIA INFRASTRUCTURE