Railtel new comer in kavach
7000cr tender on 19th sep
6 Likes
RailTel w/Quadrant Future Tek
RailTel Corporation of India Limited signed a memorandum of understanding (MoU) with Quadrant Future Tek Limited for works related to KAVACH installation on May 1, 2024.
In the process of understanding the new entrants, I discovered that Quadrant Future Tek Limited has a DHRP on their website. They are in the works to list on the exchanges. Their DRHP is dated June 2, 2024. I have concentrated only on Kavach related notes in their DHRP.
About the company: Quadrant Future Tek Limited
- The manufacturing operations of the Company are based in Basma, Mohali and Railway Signalling & Embedded System Design centre at Bengaluru, Karnataka and Hyderabad, Telangana.
- Bengaluru & Hyderabad - consists of 24 employees in the Railway Signalling & Embedded System Design centre, which is approximately 9.02% of our total employees.
- Mohali - our manufacturing facility, situated in Basma, Mohali, Punjab, with a dedicated Production floor area of approximately 60,000 sq. ft.
- Quadrant is a research-oriented company, engaged in developing new generation Train Control and Signalling Systems that offers the highest level of safety and reliability to rail passengers and also possess an irradiated / E- beam cable manufacturing facility with Electron Beam Irradiation Centre.
- The Company offers speciality cables for Railways rolling stock and Naval (Defence) industry.
- Our facility also possess end to end infrastructure capabilities for production of Solar & EV Cables.
- We believe that our competitive advantage is our technology and innovation-driven approach, our efficiency in operations, maintaining quality control, experienced domain professionals and R&D structure enabling indigenously developed solutions.
- Our Company caters to two different industries, namely:
- (i) Cable industry with niche technology for manufacture of E-beam cables which are primarily used in various industries requiring stringent norms, including Railways, Defence, Renewable Energy & Electric Vehicle sectors and growing applications across industries; and
- (ii) Railways sector for Automatic train protection (ATP) and KAVACH system and growing demand in related technologies and development of new systems to enable safety and capacity augmentation in railways.
- The IPO proceeds are for:
- 175 cr = funding working capital
- 25 cr = capes for development of electronic interlocking system
- 25 cr = working cap loan repayment/prepayment.
- Entered into an exclusive Memorandum of Understanding with RailTel for delivering the specific targeted opportunities related to KAVACH in Indian Railways and other Countries Railways.
- Unique technology for the manufacture of cables that meets the stringent requirements for multiple industries, namely Railways, Naval Defence, Renewable Energy & Electric Vehicle sectors.
- For enhancing the safety standards and faster movement, Indian Railways is developing and creating technology in areas such as signalling and telecommunication with 15,000 kms being converted into automatic signalling and 37,000 kms to be fitted with âKavachâ, the domestically developed Train Collision Avoidance System (CareEdge Report).
- The Indian train control system market size was estimated to be valued at USD 208 million in CY23, which is further expected to reach USD 208 million in CY24. For the forecast period CY24-CY30, the market anticipated to grow at a notable CAGR of 12.6%. (CareEdge Report). Once implemented, KAVACH will be the worldâs cheapest automatic train collision protection system, costing approx. âš 5.00 million per kilometre to operate compared to about âš 20.00 million per kilometre worldwide.
- We have vertically integrated manufacturing operations for the hardware and software required for Train Control and Signalling Division which allow us to manage manufacturing processes in-house, from design and development to manufacturing and delivery.
- The train control and signalling division primarily consists of 3 parts:
- Train Collision Avoidance System,
- Electronic Interlocking System and
- Multi Section Digital Axle Counter.
Presently our Company has developed solution for Train Collision Avoidance System.
- Based on our registration to develop indigenized KAVACH (Indian Railway ATP) and successful Type testing, we have been accorded proto-type approval by Indian Railways / RDSO and further technical clearance for deployment of our systems at 5 railway stations, 10 trains / locomotives and 5 units of Remote Interface Unit besides the track on a stretch of 43.6 km at âMoula-Ali (Excluding) - Raghunathapalli section of South Central Railway - Reach 2â covering 5 stations and 10 train sets. The said order is for an aggregate value of âš 168.60 million. [16.8 cr]
- Initial Order: Based on our registration to develop indigenized KAVACH (Indian Railway ATP) and successful Type testing, we have been accorded prototype approval by Indian Railways / RDSO and further technical clearance for deployment of our systems at:
- 5 railway stations,
- 10 trains / locomotives and
- 5 units of Remote Interface Unit besides the track on a stretch of 43.6 km at âMoula-Ali (Excluding) - Raghunathapalli section of South-Central Railway - Reach 2â covering 5 stations and 10 train sets.
- The said order is for an aggregate value of âš 168.60 million.
- For the said deployment of Kavach equipment, our Company has nearly completed the entire civil work required and is in the process of deploying stationary, RIU and onboard Kavach systems. Upon successful completion of the project execution, warrant period shall be 2 years and thereafter AMC period shall be 1 year separately for onboard and trackside systems.
- Our Company is inter-alia responsible for technology maintenance and upgradation as per the specifications of RDSO for entire life cycle of the project, meet RDSO specifications to be eligible for participation in upcoming tenders of KAVACH on Indian Railways, provide technical expertise for the project execution along with provision of expert manpower and required technology solutions and to participate in KAVACH tenders of Indian Railways or other countries jointly with RailTel.
- For the present implementation of our Train Collision Avoidance System, we have only one customer, i.e. Indian Railways.
- On May 01, 2024, our Company has entered into a Memorandum of Understanding with RailTel Corporation of India Limited (âRailTelâ), a Government of India undertaking, to define a framework of inter-se co-operation to (i) establish high level understanding of intended opportunities to pursue within the said MoU, (ii) KAVACH as a means of Automatic Train Protection System for Railways in India and abroad, and (iii) to re-align and broaden the above targeted scope as per the opportunities within other countries and their Railway System. This Memorandum of Understanding shall remain in force unless terminated by either of the parties in accordance with terms hereof. RailTel shall lead engagement and discussion with key stakeholders within Indian Railways and other Countryâs Railways and to participate, market and implement KAVACH technology jointly with Quadrant in Indian Railways and in other countries.
- This MoU shall remain in force unless terminated by either of the parties.
- RailTel shall lead engagement and discussion with key stakeholders within Indian Railways and other Countryâs Railways and to participate, market and implement KAVACH technology jointly with Quadrant in Indian Railways and in other countries
- For implementation of a TCAS system, 4 systems are separately installed, comprising of:
- on-track equipment (e.g. RFID tags),
- track side equipment (e.g. railway towers),
- indoor equipment (e.g. station TCAS, relay, etc) and
- on-board equipment (i.e. Loco TCAS, Driver Machine Interface, etc).
Kavach is the first system in India which has bought all these four systems together.
23 Likes
I downloaded the latest list of all RDSO approved vendors for KAVACH. I was surprised to see that all vendors, including Medha, HBL and Kernex, are listed as âdevelopmentalâ vendors and not âapprovedâ vendors.
Among developmental vendors there are 3 different levels of approval:
- Development Vendor with supply capacity limit - Medha, HBL and Kernex
- Development Vendor for field trials only - GG Tronics and Quadrant
- Development Vendor for prototype only - 7 companies. See the table below.
The actual PDF downloaded from IREPS website is attached.
KAVACH Vendor Directory 07-Sep-2024.pdf (2.6 MB). I have extracted and distilled the information in the table below.
Approval Has Capacity Limits
So as you can see, not only are there 3 different levels of approval, the final approval also has a limit on capacity. Apparently RDSO also assesses supply capacity per annum. In one of the interviews the Railways Minister Ashwini Vaishnav also talked about awarding contracts based on manufacturing capacity. So now it all makes sense.
I am not sure how long does the process from field trial to final approval take. GG Tronics and Quadrant received the go ahead for field trials on 29th May 2024. As of today they have approval only for 5 sets of KAVACH (which means KAVACH for 5 station side equipments, 5 trackside and 5 onboard locomotives). So it appears to me that these 2 companies are not competing in the currently released tenders. The other 7 companies - big names like BEL, BHEL, Siemens etc. are not even eligible. I may be wrong, someone needs to cross check.
KAVACH Will Keep on Evolving
Also, as I mentioned before, everyone is a âdevelopmentalâ vendor now. No one is an âapprovedâ vendor yet. This means the KAVACH systems will undergo further changes. Currently it is at version 4.0 (previous was version 3.2). So it looks like the whoever is on the latest version will always have an advantage as far as eligibility for tenders is concerned. What I mean to say is - lets say a company has approval for ver 3.2 and wants to go for ver 4.0, then there will be some time lag due to RDSOâs testing and evaluation process. The tenders released are always for the latest version and if a new tender arrives before the company has received the approval for the latest version then they will not be eligible for the tender.
What would be the reason behind RailTel signing the âexclusiveâ MoU with Quadrant? I understand the MoU part, but not the âexclusiveâ part. Quadrant has a lot to gain out of an exclusive tie up with RailTel, but I am not sure if RailTel has. Logically speaking RailTel should be open to working with any RDSO approved KAVACH vendor. Anyways a MoU is not a binding legal agreement, so I would not read too much into it. The timing is also suspicious, just 1 month before they filed the DHRP.
34 Likes
Thank you @ganeshrpl and @fabregas for detailed inputs.
Yesterday I scanned through AR of Kernex. Have also been reading on Kavach opportunity and challenges involved in various magazines and articles. From what I could understand, since 4.0 is a big upgrade over 3.2, development, testing and migration, and certification of all vendors for 4.0 is taking a lot of time. There are multiple departments in railways that are involved which is adding to a lot of friction, in-fighting and overhead.
Also, original plan was to slow on roll-out but with recent accidents there is lot of pressure on govt to get this rolled out across majority of the rail network. However since Railways worked with smaller companies for developing the technology, the available capacity is very limited against the massive demand. Hence the push to get more vendor partners onboardedâŚbut given the complexity of the technology and stringent railway certification requirements, this is going to take a lot of time.
So while the demand is huge, awarding tenders, announcing results, deployment of the technology, testing and railway acceptance is going to take a lot of time. No instant miracles here except for order book wins that might aid the companies share momentum price in bull run. Given the way railway operates, most of these vendors will have long implementation timelines, very long WC cycle, negative cashflows and lumpy payments.
Just my 2 cents.
Disclaimer: invested in HBL and Kernex
9 Likes
Have started reading through latest AR for HBL. On page no. 8, management has sort of tried to temper expectations of investors by giving a very cautious guidance as below:
POSSIBILITIES FOR THE NEXT FOUR YEARS
1 9. 69
EBITDA MARGIN (%)
When one gets the urge to predict the future, the wise man calms down
until the urge goes away.
With this caveat, HBL sees the near future as follows:
- FY 24 was an unusually good year. Cannot expect such growth to
continue - FY 25 sales may be about the same as FY 24 because; no Kavach
tenders were issued from Feb 2022 till 6 August 2024 - FY 26 sales may be 30% more than FY 25 sales, because Kavach
tenders were issued in August 2024 - FY 27 and FY 28 may have compound growth in sales at about 20 % a
year over FY 26 - Minimum level of moderation of EBITDA should be expected with
such growth
11 Likes
In-spite of management projecting flatish topline for FY25, stock price is still holding. Ideally this information should be factored in the price by now, though if there is a severe correction in the market, what would happen to an expensive stock is anyoneâs guess.
While the management has been conservative and delivered above their projections in the recent past, I am unable to understand the rationale behind two things mentioned in the AR-
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For EV trucks, HBL wants to go on their own instead of tying up with any existing OEM. Not sure how this will pan out - B2C success heavily depends on distribution/dealer network and service capabilities. Not sure how HBL will be successful here.
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They vaguely mentioned about private equity being a new business avenue for them . I seriously hope HBL does not get in to this. Engineering and PE are two different things altogether.
Disc- Significant holding from much lower levels
4 Likes
The key takeaways for me from this yearâs Annual Report are as follows:
This is very significant since HBL is the only company that makes everything in house from battery cells to battery packs in India as of now and cna have customised solution for various use cases. I am not sure about volumes here but onboarding Siemens for LIB is very significant as it shows how HBL can be a key partner in areas where China is not an option for batteries.
This is first time HBL has confirmed making newer EV trucks. The story until now was always retrofit. HBL owns the complete technology here from battery/controlller/charging infra/motors etc. Lookin at the current set of alternatives in the market I donât see any competitor which has complete in house technology. How this will play out is very difficult to predict since it requires a lot of things to fall into place including financing + charging infra but having known HBL they will put their best foot fwd and not come with a half baked solution. They have also gained experience in setting up charging infrastructure with their subsidiary TTL ELECTRIC FUEL PVT LTD (EFL).
Going by the above HBL plans to offer a far more comprehensive EV solution than just selling EV trucks but limiting it for the area usage to a few highways in the beginning and later expanding the network.
Clearly acknowledging that it is difficult to compete with the Chinese EV battery ecosystem unless there is Government support. HBL has always been clear it doesnât want to get into businesses which require govt subsidiy or duty support.
HBL over last 10 years have made two âPE type investmentsâ one was Igarshi and other more recently Tonbo. Even though both of these have been excellent investments both in terms of valuations where they were bought and the exit/visibiity that they have I hope that these âPE type investmentsâ remain far and few. I would have preferred if the promoters did it in their own account.
Looks like the company will move towards some kind of professional management model with key promoters ensuring business continuity.
56 Likes
I have similar concerns on the decision to become OEM for EV trucks. On one side they are saying they donât want to get into âcapex heavyâ areas and on the other side this decision to become OEM will ensure they have to do heavy capex. Besides I donât know how much margin they will make in this business, and how they will compensate for the lack of previous experience of running such a business. Partnering with one of the existing OEM would have been a less risky strategy along with faster time to market.
Without conference calls, hard to get insights into the reason for this management decision.
2 Likes
HBL AGM 2024 snippets.
Few points from Hbl AGM
- Change of name because it embodies future expansion like EV trucks;
Management has given guidance of 30% in FY 26 growth over FY 25 numbers but if forced to reveal, they will surpass this guidance.
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No plan to do anything with Tonbo investment. It should list in early 2027. Hopefully will reap benefits then;
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In terms of capacities, while Hbl can scale whenever it wants, currently it can do 2000 km/year of TCAS on tracks and 3000 loco/year. TCAS is a huge opportunity;
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Hbl is the only company which has completely indigenous TCAS system;
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Lot of scope of batteries (other than lead). Eg., Siemens wants Hbl to manufacture Lithium batteries for them. Traction in defence batteries remains strong.
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Kavack 4.0 and 3.2 are not inter operableâŚRailways have to think about that; I got a sense that the recently tested Kavach 4.0 in presence of railway minister was HBL product.
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Demand is huge but execution is slow because of lack of trained officers;
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TMS will grow slowly;
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Mgmt is nurturing high hopes on EV truck with in-house Electric Drive Train. Confident of sharing a prototype in January 2025 and production form Oct-Nov 2025;
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Co has no plans to become big mass producer of trucks but a niche player producingâŚsay 1000 trucks a year at a price of Rs 1 cr/truck (may not be immediately but eventually) with good margins. Thus WC will not be an issue;
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Retrofitting old trucks with its E Drive train is not feasible cause trucks are old and run down;
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Regarding defence products, co wants to focus on exports and not so much on indian defence. There is huge demand for fuses in variety of products.
Managment has committed to think about increasing dividend payout ratio in view of expected higher profits over the years.
89 Likes
Kernex FY24 AGM Highlights
- Will do 230cr sales in FY25 (can increase if some of new tenders close by December), FY26 will be atleast 3x FY25 revenue
- Till date 11600cr worth of new tenders are out (Last tenders 2 years back were 1500cr), out of which 25 tenders are for implementation (kms) and 3 tenders are for Loco
- Loco tenders bid close date is October 4th and is expected to be awarded by December 2024
- 60-70% tenders of the 28 tenders are expected to be awarded by December, some of the tenders have November bidding so result may come in January
- 44000kms worth of tenders to come by 2029, another 10,000km tenders expected after current 10,000km tender
- Locos TCAS implementation to be completed in 12 months
- Kernex expecting to win 25-30% of total tenders value
- Earlier guidance of 900cr sales in FY25 will not be met because the new tenders coming out now were delayed by 1 year and also some of the customers (Railway zones) wanted TCAS 4.0 and not TCAS 3.2, confident of meeting guidance this time
- Working capital requirement will be around 150cr for new tenders, have tied up with banks
26 Likes