Titagarh Rail Systems Limited (TITAGARH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Titagarh Rail Systems' Q3 FY '24 Earnings Conference Call hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhirendra Tiwari from Antique Stock Broking. Thanks, and over to you, sir.

Thank you. Good afternoon, ladies and gentlemen. On behalf of Antique Stock Broking, I welcome you to the 3Q FY '24 post-result conference call of Titagarh Rail Systems Limited. To discuss results, we are glad to have with us today Mr. Umesh Chowdhary, Vice Chairman and Managing Director; Mr. Anil Agarwal, Deputy Managing Director and CEO, Freight Rail Systems; Mr. Prithish Chowdhary, Deputy Chief Executive Officer, Passenger Rail Systems; and Mr. Saurav Singhania, Chief Financial Officer and Chief Risk Officer. We welcome the management of TRSL on this call. Now I invite Mr. Umesh Chowdhary to give his opening remarks following which, we will open the floor for Q&A. Over to you, Mr. Chowdhary.

Thank you, Mr. Tiwari. Very good afternoon to everybody, and thank you very much for joining our Q3 earnings call of Titagarh Rail Systems. [Technical Difficulty] The performance of the quarter has been as per expected -- on expected lines. I would like to highlight a few key developments of the quarter. And of course, the numbers are already available to everybody, but I would just like to highlight a few key developments of the quarter. For the first time in the history of the company and probably in the history of India, a company has crossed the 1,000 wagon mark per month, which we did in December 2023, when the company produced 1,021 wagons. This has been our target within this financial year to reach 1,000 numbers, and we were able to break that barrier in December. We are also confident of being able to stabilize at that run rate within this financial year, that is March going forward. The order book stands at about INR 27,500 crores. There have been new tender pipelines that have been happening. And based on capacity, based on strategy, we will continue to book orders as we go along. The other very important milestone of the quarter was a conclusion -- successful conclusion of the QIP which happened in December this year. The company raised about INR 700 crores by way of the QIP, which received a very strong response from marquee investors, which is a endorsement on the faith that the investor community has in the company. On the passenger side, a strategic partnership with ABB for development of propulsion for metro and particularly the TCMS for Metro was signed. The work of that has already begun. And in terms of our stated strategy on backward integration or I would say, making the 2 product lines, which is the wagon and the passenger coach as the epicenter and capture whatever value can be captured in the radar of that epicenter, both in terms of forward integration for services, backward integration of components is something that we were able to take forward by the strategic partnership alliance that we entered into with the Amber Group, which is also a listed company, their subsidiary, which is into railway components, Sidwal Refrigeration, wherein on one side, Sidwal will join us as a co-partner or a co-investor in Firema, which has also received some very good orders. And on the other side, we will set up a joint facility in India for interiors and other components, which will help us to backward integrate on our passenger rail system side. The numbers in terms of performance is already available with you. And with these few words, I would hand it over back to Antique and would be happy to take any questions at this point of time. Thank you.

[Operator Instructions] The first question is from the line of Nikhil Abhyankar from ICICI Securities.

Hello. Yes. Am I audible? Hello?

Yes, sir.

Yes, now you are. Please go ahead.

Sir, so currently, we've got a tender of 10,000 wagons open. So is there any other tender open right now? And do you expect anything before the general elections?

Sir, wagon tenders are continuing to come. They are an ongoing one, and we would only comment on them once the tenders are concluded. We would not like to make any interim comments on them, but there are continuous tenders that are happening and from media reports, I'm sure you are aware that the requirements -- earlier the railways used to bulk up their requirement and only come up with 1 mega tender. Now there have been smaller tenders that have been coming up.

Understood. And sir, in the recently concluded tender of 20,000 wagons, there was a lot of undersubscribed capacity. I mean, only, I think, around 11,000, 12,000 wagons were ordered. So what -- why exactly was that? And how is the order allocated in these tenders usually?

So the railways have changed their procurement policy, wherein companies are incentivized and disincentivized both to be more compliant with the delivery requirements, which is good for our company. And that has brought in more responsible bidding, I would say, in the industry. And earlier regime of people wanting to take orders with or without capacity back up is no longer the case anymore. And in terms of the tender that was finalized, you are right, the tender was not fully finalized. It was almost 45% of the tender, I would say, was short closed, but we expect that will come back again with the revised schedules so that capacities that are available can be utilized.

Understood. And sir, of our current order book, how much is private orders? And what is your outlook on private orders going forward say, in FY '25?

So I'm not sure whether we have disclosed a breakup of the private versus the railway orders, but I can only say that, even today, we are the largest private -- we have the large market share in terms of the orders booked with us from private sector in the industry. So we are very strong in the private sector wagon space as well.

Okay. And sir, just a final question. Have we started production or execution at the Vande Bharat -- for the Vande Bharat...

Absolutely, yes. We have -- the contract entails design and then production. We are at a very advanced stage of the design completion. We have already submitted our preliminary proposals to the Railway, and we are going as per schedule on this project.

So when should we expect the first rollout?

The first train is scheduled to be rolled out in June 2025.

June '25. So June '25. Okay. Okay, sir.

And we should be seeing the design launch. So it is already with the Railways, so we should be seeing the design launch soon.

Okay, sir. Understood. I've got a few more questions, I'll get back at the queue.

Next question is from the line of Akash from Dalal & Broacha Stock Broking.

Congratulations on the great set of numbers. So my question comes to understand the passenger -- on the passenger mobility segment side, what is the visibility? And what would be our execution schedule for the next 2 to 3 years?

Thank you, sir. So on the passenger side, as you would see in the presentation, we have a very healthy order book. In terms of the pipeline, there are several metro tenders, which are already in the pipeline. The Chennai and Mumbai to name a few have already been published, but there are a number of them which are likely to be issued in the next months. The company is actively pursuing all these opportunities. There have been announcement on proliferation of Vande Bharat, Vande Metro Train, which we believe will pick up momentum after the elections and the company would be very actively pursuing all of that also. In terms of execution, we would be starting the Bangalore Metro execution with CRRC very soon. So the metro production line, which will have a capacity of about 36 cars per month will be fully ready for production by, I would say, second quarter of the coming fiscal or latest by the third quarter of the coming fiscal. And we'll start picking up on production. Our target is to reach up to 20 coaches per month in the coming fiscal, which is much larger from where we are, on an average, we have been hardly about 3 to 5 coaches per month. And our target is to by I would say third quarter of next fiscal, we should be able to hit the run rate of 20 coaches -- between 15 to 20 coaches per month. And the ultimate capacity that we are looking 3 years down the line, between 3 and 4 years down the line for the passengers including Vande Bharat and Metro would go up to 70, 72 cars per month. So that is the overall visibility plan for the passenger rail segment.

Next question is from the line of Vaibhav Shah from JM Financial Limited.

Sir, of the 24,000 wagons order that we had received in May '22. So how much we would have already delivered to railway, a ballpark figure would do.

So approximately, I mean, it has to be delivered over 30 months. It had to be delivered over 30 months. And we have now just crossed less than -- sorry, 39 months. So we have just crossed just about a year now or a little more than a year. So on a pro rata basis, I would say we are, by and large, you can consider it on a pro rata basis.

Okay. And sir, what would be our CapEx in the first 9 months of this year? And what it would be in FY '25 and '26?

I would not be able to disclose any number, which is not there in the presentation or what has not been disclosed because in [ September ], we don't give the balance sheet. But whatever was described in the September numbers in terms of the CapEx, we have already declared about the overall capital investment plan that we are intending to make in the passenger side and also on the freight side, which is INR 1,000 crore over the next 2, 3 years, including what we have spent over the last couple of years, and we are pretty much in line with that.

Is it safe to assume you would have spent around INR 300 crores and roughly [ INR 650 crores ] will be spent in next 2, 3 years, ballpark?

I would once again refraining from giving a number, which is not a part of the presentation. So whatever was disclosed and we do not have that handy with me in the September results is what we would like to state right now.

Okay. And sir, one more question on the standalone account, so we have X of wheelset and X of Vande Bharat orders, the AMC part, so the book would be INR 7,000 crores for passenger side and -- sorry, INR 6,800 crores passenger side and around INR 7,350 crores for the freight side? If we remove the INR 13,000 crores book from the AMC part and wheelset part?

Yes, approximately. Yes, that's right.

That should be the currently what we have in hands for the standalone books?

That's right. It's already disclosed on Page 8 of the presentation, sir.

Yes. Okay, I wanted to confirm that. And lastly, sir, in terms of our Bangalore Metro contract, which are going to start. Sir, what will be the value of the contract?

We are doing it on a subcontract basis. So the material is on free supply, therefore, the value is only for the conversion.

Okay, so INR 184 crores was like before mentioned during a year back, so that was true?

Yes, that's right.

Only INR 184 crores is there in order backlog?

Of the Bangalore, that's right, yes.

Next question is from the line of Abhishek Shah from Ambit Limited.

Congratulations on good numbers. I just had a couple of questions in terms of -- on the passenger side, again, what is your sense on the overall, if you could give any color on maybe this year and the next couple of years, the overall demand of the market size? And what would our market share be in that going forward? Also, secondly, it is not that we are at about 1,000 wagons per month currently and are looking to stabilize this going forward. What would be our target over the next couple of years in terms of any growth in that capacity going ahead?

Thank you. So as far as the passenger is concerned, I already just gave the numbers that we are looking at stabilizing between 15 to 20 coaches per month within the middle of the coming fiscal. And going forward in 3 to 4 years' time, we would increase it to 70 to 72 coaches per month. The market is quite buoyant. There are a number of tenders coming up. Once we are able to touch the 70, 72 cars per month, we would, in my understanding be the largest -- we would be the largest capacity in the country as of now, not factoring in any potential capacity expansion that companies may be planning, but we are not aware of. In terms of the freight side, we would first like to stabilize on a consistent basis at 1,000, and then we will discuss about whether the market exists or the demand is sustainable enough for a further capacity enhancement. But right now, what we are looking at is to -- we are not in an average of 1,000. We are on an average of about 700, and we would like to become an average of 1,000 going forward. What I mentioned was that we have been able to break a barrier. It's also a barrier of mindsets and everything else that we were able to touch 1,000 wagons in 1 month. And the way we look at it is that if we can do it once, we can do it every month.

Next question is from the line of Mehul Mehta from Nuvama PCG.

What I want to [ still ] -- in terms of debtors, I think at the first half and like had intensified, I mean it has increased a lot. So is there any softening of debtor cycle or like it's still continuing the same?

For debtors, it is pretty much the same. The customer mix remains the same. Sometimes the quarter-end debtors are -- go up also in terms of the sales. As I said, December was a record month for us in terms of production. So therefore, the debtors swells up on end of December. But there is no -- if your question is, if there is a fundamental shift in the characteristic of the market or the way the market behaves in terms of the debtor management, no, there is no shift.

So maybe if you can reply in terms of like, say, our working capital cycle deals, like you can say, at FY '23 end. Should we expect like by even FY '24 and it should be increasing or like maybe some sort of indication on that?

We'd not like to give any indication of the numbers of the future. But what is declared in the chart on Slide 13 gives you a flavor of the average working capital days that we have [ played ] with. And we believe that we should be able to stay with the same or improve upon it.

Got it. Another question is in terms of capital employed, I feel -- if I look at for freight segment, it has been about INR 858 crores at the end of quarter 3. So could you like share in terms of what would be working capital and net block kind of like a breakup in terms of the INR 850-odd crores?

The numbers that have been disclosed. I would not be having that number handy, but the numbers that have been disclosed, I think, are already giving that breakup. I don't know if Saurav, is there any other number that is on public domain that you are able to share then you can do that please.

No, sir, I think this is the only number which is right now there in the public domain because breakup of balance sheet is not there this time.

Next question is from the line of Karan Gupta from Varanium Capital.

Hello. Am I audible?

Yes.

Yes.

Yes. So sir, related to the passenger side, when...

Your voice is unclear, sir.

Sir, my question is regarding the passenger segment. What is the estimation you are having in terms of volume that you'll break even the margin expansion in this segment like 2% to 3%, we are seeing as of now. But what's the margin expansion you are seeing in this segment because in passenger segment, all the propulsion and electrical things we are including in this thing. So what's the margin expansion that you are seeing?

So as we had shared in the past the normal margin, if we buy propulsion that is we are not doing our own propulsion is around 10%, but when we are able to switch over to our own propulsion, we would be able to see a margin enhancement of almost 4% to 5%. So once we are fully integrated with our own propulsion and we are able to also have the operating leverage in terms of reaching the optimum level of production as per capacity or near to capacity, we should be able to get to these levels of margin. Right now, the margins are not really a barometer of the real scenario because the volumes are extremely small. Therefore, the fixed costs and the operating leverage is really not there.

So not estimating any breakeven in terms of volume?

We are already breaking even. We are already at EBITDA positive. So even volumes at current levels, if you see the segmental revenue, there is an EBITDA positive.

Okay. And next couple of years, any plan to raise capital?

No, as of now, with the current level of capacity expansion plan that we have undertaken and the projects that we have on hand, we believe that we are fully capitalized.

Next question is from the line of Rajesh Bhandari from Nakoda Engineers.

Sir, you mentioned that our order book portion is approximately INR 27,000 crores. Does this include service also because service also we have big large order?

Yes, sir. It does include service also. As I was just mentioned, by in a question -- a couple of questions before, on Page #8, we have given that breakup as well.

[Foreign Language] turnover approximately, say, INR 3,500 to INR 3,800, maybe we may close '23-'24 in INR 3,600 approximately. What is our expected turnover for '24-'25, '25-'26 and '26-'27, as expected?

Sir, we do not give any forward-looking projections. But I think you can safely see that the run rate of the wagon is stabilized and the passenger segment will start coming in with the kind of order book that we have we should be able to start delivering the numbers out of the passenger segment also in the next years.

[Foreign Language]

[Foreign Language] And that is what we had -- I had said in the last call also that we are now stabilizing at about 700, 750 wagon per month level and if you see the breakup of the revenue, it is almost 90% from the freight segment right now. The passenger segment will start coming in from the Q3 of next year.

Q3 of next year?

Yes, of the coming year.

[Foreign Language] then how many years will it take? [Foreign Language]?

[Foreign Language] So these are all based on the orders that are going on as per the plans and as per the delivery requirements of the customer, we will be able to -- barring a few couple of months here and there, which is normal in this industry and it will be made up, but there is no failure on a larger-scale basis.

[Operator Instructions] Next question is from the line of [ Indrajeet Chakravarty from Scrip Trading Corporation ].

Okay. My question is regarding our passenger rail system. I find that the revenue this quarter is significantly lower year-on-year. So can you please explain why this has happened? That is my first question.

Yes. Go ahead, sir. Please go ahead with your rest of questions.

Yes. And my second question is that what is the net order intake for this quarter? This quarter which went by, what is the net order intake?

Thank you. So as far as the passenger rail segment is concerned, it is, as I mentioned a little while earlier, the Pune Metro contract is coming towards the finish, and we will be starting the next contract in April. So this is the intervening period. Therefore, the numbers are muted. As far as the net order intake is concerned, Saurav, I don't know if we have disclosed that number. If we have, then you can please...

No, sir. We don't disclose quarter-on-quarter order intake, sir. It's a total number in the Slide #8, which explains the breakup.

But I think it can be simply worked out. So we'd not like to mentioned that right now because we have not put it as a part of the presentation, but I think it can be figured out from the overall order backlog that has been carrying forward.

Okay. And if I might ask one more question. Is just means trying to know why this has happened that they have recently concluded that 20,000 wagon order, which has recently concluded, and it was not fully filled up. So Titagarh did not receive any orders from there. So can you please tell us that what is the reason behind that? Is there any reason -- specific reason like a lack of capacity or something like that on behalf of Titagarh?

I just mentioned, sir, a little while ago that every tender has its own peculiarity. And there are number of -- railways have started coming up with multiple smaller tenders. It is not possible for a single company to win every single tender. We are in a competitive landscape. It is a normal practice that you win some tenders. You don't win some tenders on account of either the pricing or your capacity or even your capacity planning based on the market circumstances, which is a decision that is taken on a case-to-case basis. On an overall basis, we continue to be market leaders.

And we still have the capacity to take on new orders, right, sir?

Absolutely.

[Operator Instructions] Next question is from the line of [ Raja Mohan V. ], an individual Investor.

Congratulations once more on solid performance. I have a couple of broad questions. The first one was on passenger rail specific to Vande Bharat. You mentioned in your presentation, the estimated opportunity over the next 3, 4 years is about INR 48,000 crore to INR 52,000 crores in Vande Bharat and INR 60,000 crores to INR 65,000 crores for mini Vande Bharat. Being a major private wagon manufacturer and with the credentials getting established after probably executing on the 80 trains in the first order set, do we have any market share target based on your understanding of the ground realities on say, indigenization and the competitive scenario? Also, in the context of rules being tightened and bidders coming short, I would like your perspective.

Thank you very much, sir. In terms of the market size, it is quite large. And in terms of our aspirations, I would say they are also quite ambitious. I would not like to put a number to that target, but we would definitely like we have been able to attain market leadership on the passenger, on the freight side, we would definitely aspire to attain market leadership on the passenger side. The very fact that we have been able to be a first mover, whether it was aluminum metro, whether it is a private sector metro manufacturing, whether it is Vande Bharat, is a testimony to what I just now said. And we believe -- so let me put it the other way around that the capacity that we are creating is something that I have already disclosed. And our first target will be over the next 4 to 5 years' time to ensure we have enough orders to fill up that capacity, which in itself is a very large jump because from an existing level, it means almost a 20-fold jump.

Okay. That was a good perspective on the whole thing. On second one -- second final one, the freight rail of the 1 lakh to 1.2 lakh wagons planned in India between 2022 to '26, which has been mentioned in your presentation. We have completed 2 years, 2022 and 2023. Out of this 1 lakh to 1.2 lakh, how much would have been executed? And as we hit 1,000 wagons a month, how do we see it accelerate over the next 3 years, though you say you will stabilize at 1,000 wagons, how do you see the opportunity accelerating for you to step on the pedal further? Could we sort of -- I was just trying to guess would we head towards a 2,500 to 3,000 wagons a month production capability by '26?

Sir, we would not like to preempt any situation. We would like to wait and watch. We believe that the current -- so firstly, your question was whether the addition has been pro rata to the overall target, and the answer is yes. The addition is on a -- is it consistent with the overall targets? I would not say pro rata, but I would say in line. In terms of the capacity according to our understanding, the capacity is something which the planning is a dynamic one because the way the Indian government is progressing the way India is progressing. I don't think that one can any time the luxury of sitting back and relaxing. So we are waiting -- like this -- we heard the Finance Minister, honorable Finance Minister announce 3 new corridors. And of course, after the election, when the new budget is presented, we will see what kind of opportunities are presented, and we will recalibrate ourselves based on that. But what we are very, very conscious about is that we would not like to be trigger happy. We would like to have some bit of consistency and market visibility before we push the pedal further.

But you've seen that consistency, especially in the last 3 years where basically the railway budget itself has gone through the roof in terms of exploring. So you've seen the consistency on the ground also happening with the government intention also pretty clear, right?

Absolutely, absolutely. There is absolutely no second doubt about it. No second thought about it.

Okay. And thank you very much for all the answers in such a -- I understand it's a complicated overall environment but the way in which you have been presenting and executing is really quite encouraging for investors like us. Thank you very much and best wishes.

Thank you very much, sir.

Next question is from the line of Vaibhav Shah from JM Financial Limited.

Sir, typically, when we win a wagon order, so suppose we win a wagon order today, so typically, when do we start the production or delivery of those orders for wagon segment in the freight side?

Normally, it's about 5 to 6 months that the railway gives us as a gestation. But then that's a normal thing. It depends on a tender-to-tender basis, sir.

Okay. And how will it be the same in the passenger side.

It's much longer because the designing is involved.

So it could be roughly between 12 to 18 months, at least?

It depends on a tender-to-tender basis.

Next question is from the line of Nikhil Abhyankar from ICICI Securities.

Sir, I had a follow-up on. In the recent budget, there was an announcement that 40,000 passenger coaches will be converted to Vande Bharat class. So do we -- can we participate in that opportunity? And how do you think will it be executed?

Thank you, sir. We do not have a complete picture on this. We also have seen the announcement. Once the railways firm up their requirement on the whole project and the tender, et cetera, we will definitely evaluate, having been already got an advantage of a first mover in this segment, we would definitely not let go of any opportunity which we stumble on.

So basically, not before this election you to expect this to move forward?

I would not be able to comment on that because this is purely with the government. So whatever -- since the announcement has made maybe before the election, but this is something which will be speculative for me to comment either ways.

Okay. Understood. And sir, what is the status of the wheelset factory that we are setting up?

The project is moving on. The wheelset plant machine ordering, et cetera, everything is going on. And we are scheduled to start production in 2026 -- '25, and we should be -- end of '25, and we should be on target with that.

Okay. And sir, any update on like GPWIS scheme was stopped a few years back. So any update on that? Will it be retained or will it be allowed again?

To the best of my understanding, the scheme was not stopped. New permissions were not being given because there were a number of permissions that were already there for which the wagon procurement was pending. A lot of wagon procurement has been happening on that. And we will see once the pendency reduces what the railway decides. We also believe that it's a win-win policy for the industry and the government alike. And therefore, we believe that the railways will take a decision, which is in the best interest of both railways and the industry.

Okay. Sir, and just a final question. What will be the debt equity and cash balance as on December '23?

As I mentioned that we do not declare the balance sheet. So whatever numbers have been declared in the presentation or in the results are the only numbers that we will be able to share.

Next question is from the line of Balasubramanian from Arihant Capital.

Congratulations for good set of numbers. Sir, my first question is regarding on the metro side, we have delivered 27 train sets out of 34. And you have mentioned that the remaining will be delivered by end of this year. And it means like around 78 sets -- around 24 cars we can be able to deliver in this quarter itself, sir?

That's right, sir. But a lot of trains are already produced that are in testing. So we believe that bulk of it maybe apart from a train or so will be all completed within this financial year or beginning of the next.

Okay, sir, got it. Any further metro orders are in pipeline, sir?

There are tenders which are in the pipeline, and we will definitely announce about them once -- as and when we are able to attain success in them.

Okay. Got it. Sir, recently we've been entered a strategic partnership with ABB and strategic alliance with Sidwal so like what kind of synergies we have on those partnerships? And is there any other plan in the future?

The synergies of both these partnerships have already been disclosed in the press release. There is a substantive synergy and advantage that we have in both the alliances and that is the primary reason why we entered into those alliances. As far as future is concerned, as a company, we are always looking at opportunities. I mentioned in the beginning that keeping the 2 business segments as our nodal central points, we are looking at hovering around and spec trimming that -- those two nodal points to expand as much the value proposition that we can offer or we can capture. And we will continue to do that. So we are always with an open mind to see what are the additional things that can be done.

Okay, sir. Sir, what's your view on the upcoming global and other tenders, especially on the global tenders, like we have to come out with our own designs and the margins are also slightly higher. So what's your view on those tenders? And what kind of realization we can expect?

We will definitely be participating in all the tenders that are suiting our business segment and are adding value to the overall strategy of the company or as for the overall strategy of the company. But for obvious reasons, I would not be able discuss on a tender to tender basis in this call.

Got it, sir. Got it. Sir, like what kind of business visibilities we have on that propulsion system?

We have already mentioned that propulsion system is something which is very essential for margin enhancement. And this is, I would say, an essential part of our strategy, which we are pursuing.

Sir, any number we are targeting, sir?

It will be backward integrated with our coach production. So whatever coaches -- our target, our ambition would be that in years to come whether that can be achieved in x or y years, but years to come, we would like achieve self sufficiency for the propulsion for whatever coaches we produce.

Got it, sir. Sir, earlier, we guided 1,000 wagons per month by end of this year, but we already achieved in Q3 itself in December month. So what would be our target in coming quarters?

Cannot give any forward-looking statements, as I mentioned earlier, sir.

Okay. Fine, sir. Fine. Sir, in this quarter, how much wagons we have produced and what will be the private and railway mix?

Whatever is disclosed in the presentation is what we can disclose. Anything outside that in terms of the numbers, is something that we are unable to share right now. I can only once again repeat that we have the market leadership in terms of the order book for both the private sector wagons as well as the Indian railway wagons.

Next question is from the line of Kunal from B&K Securities.

Sir, my question is pertaining to the passenger rail segment. Sir, how should we think about the trajectory of margin in that business? Should we -- is 10% our aspirational margin achievable by '26 in that segment?

Yes, Kunal, absolutely. I think as I had mentioned in the past also that once we are able to reach the first targeted level of production, which is 15 to 20 cars per month, we should be able to get to margin level between 8% to 10% and when the propulsion starts coming in, then the margin enhancement happens.

Next question is from the line of Devesh Kasliwal from Antique Stock Broking.

Congratulations on a good set of numbers, sir. Just one clarification. Your presentation says that the overall capacity currently is of 8,400 wagons for a year and you have crossed 1,000 wagons in December. So can you just give the -- like are we already at the 12,000 mark right now? Or this is just because of the overutilization in our foundry?

No, the capacity -- thank you, sir. The capacity of 8,400 is the RDSO assets capacity. And the fact that we have been able to surpass that, we have already applied for revalidation of the assets capacity.

Next question is from the line of [ Sriharsha K.J. ], an Individual Investor.

Congratulations on a good set of numbers. Regarding the shipbuilding capacity, are we expecting any orders from the defense ministry? And are you also looking out for any joint venture for the shipbuilding technology?

As far as the shipbuilding is concerned, we have already announced in the past that considering the current financial and management bandwidth required on the rail business for the company, we would be exploring the possibility of inducting strategic partner for the shipbuilding and the defense business so that we can grow that, which also has a great opportunity. So we have been a little muted in allocating much resources or newbuilds on the shipbuilding side, but we are purchasing on the opportunity of structuring it in a manner so that the growth potential of the rail business does not become a bottleneck for the growth potential of the shipbuilding and the defense business without drawing upon the resources of the rail business.

Another question, sir, like do you require -- are you to raise any extra capital other than the recent QIP of INR 700 crores for executing the order backlog of this INR 27,500 crores?

I already answered this, sir a little while ago that based on the current level of expansion that we have in the pipeline and the capacity building plan, we are adequately capitalized.

Next question is from the line of [ Indrajeet Chakravarty from Scrip Trading Corporation ].

I need some clarity regarding Titagarh Firema means which is into that Italian joint venture, which we have. What is the status there? When from will -- can Titagarh start thinking of getting something out of it other than technological know-how which you have received, when would it start contributing to the profits of the company directly? If you could please throw some light on this matter.

Thank you. As far as Titagarh Firema is concerned, there is a new order that was signed by Titagarh Firema for coaches for the Italian Railways. So the current order book of Firema stands at almost EUR 1 billion. It was in need of capital, which now with the alliance with the Amber and the Government of Italy agreeing to in principle infuse further capital, we should be able to get this problem resolved as well. So we are hopeful that Firema by 2025, '26 should start contributing on a positive side. '24, '25 also should be much better results on the positive side. But the real -- I mean, the real growth will happen -- start happening in the next 12 to 18 months.

And the effect will be felt in our the same profit and loss account also, right, sir?

On the pro rata basis, the balance sheet, I mean the accounting norms are followed. Not a subsidiary of Titagarh Rail Systems anymore. So therefore, it cannot be considered as a consolidation. But whatever are the -- based on the accounting norms, it will definitely do the same.

As there are no further questions, I would now like to hand the conference over to Mr. Dhirendra Tiwari for closing comments.

Thank you very much sir. Let me thank the management of Titagarh Rail Systems for giving us the opportunity to host the call. I would also like to thank all the participants for attending the call. Before I end may I invite Umesh-ji for final words. Umesh-ji?

Thank you, Dhirendra ji. Once again, it was very interesting to interact with all the participants in this call. The questions have been very interesting, very insightful and have helped us to think deeper. Thank you to everybody for all the confidence that has been entrusted upon the company. And we do hope and look forward to live up to these expectations and continue to follow the vision of the Honorable Prime Minister of the Government of India of Make in India Atmanirbhar, completely Atmanirbhar and that's our sector, all the products that we are doing are all towards that effect and infrastructure, which is going to be a growth story in the country, I think India has just started to build up or catch up on the requirement in terms of infrastructure and particularly in terms of mobility infrastructure. And the company is pretty much in the right place, at the right time to be able to enjoy this tailwind. So thank you very much once again to everybody. And thank you, Dhirendra ji for hosting this call.

Thank you very much. Thank you, sir. Thank you all the participants. Now we can close the call. Have a good night.

Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.