Which Companies are Involved in the Bullet Train Project in India?

Among the biggest buzzing stories in the Indian stock market is railway stocks. This is with good reason. The government has announced a massive spending plan to modernise the Indian Railways.

And the railways have responded enthusiastically by laying out specific plans for various projects that encompass the entire railway value chain.

The modernisation plan involves an investment of Rs 10 to 12 trillion (tn) over the next five years to transform the railways with modern world-class facilities. Clearly, this will be money well spent.

With this massive fund allocation, the railway sector has garnered significant attention in the stock market. Some railway companies will be the prime beneficiaries.

We've written about the companies involved in the Vande Bharat trains and metro trains. You can read the editorial here.

Also, here's a list of railway stocks that could benefit from these moves. These are not recommendations.

We believe, there are significant opportunities for investors in the great Indian railway boom. In this editorial we will cover the top stocks that could benefit specifically from the development of bullet trains in India.

#1 L&T

Larsen & Toubro Limited (L&T) was established in 1946 as a manufacturing company producing dairy and allied equipment. It then expanded into repairing ships and construction.

Today, the company is the most respected multinational conglomerate that operates in over 50 countries with unmatched capabilities in all its businesses, including construction, engineering, technology, and manufacturing.

L&T has over the years forayed into multiple business verticals, including infrastructure, power, hydrocarbon, green hydrogen, metal and minerals, defence, aerospace, information technology (IT), products, systems and equipment, finance, and real estate.

L&T is synonymous with construction, EPC (Engineering Procurement and Construction) projects, and manufacturing. It ranks among the top contractors across the world. It executes turnkey projects with innovative design engineering for key sectors of the economy.

The company's in-house design, engineering, and, importantly, fabrication capabilities for critical equipment and systems, give it a robust competitive advantage. Investors always consider L&T as a proxy for India's infrastructure story.

In the railway sector, it has built metros, railway bridges, and is closely involved in India's high-speed rail project i.e. the Mumbai-Ahmedabad bullet train project.

The National High Speed Rail Corporation Limited (NHSRCL), the agency responsible for the bullet train project, has been inviting participants for completing various phases (packages) of the project. And L&T has been at the forefront of the bidding process.

L&T has won the bids to be the contractor for 4 packages. These are...

• Viaduct between Shilphata and Zaroli
• Viaduct between Zaroli and Vadodara
• Viaduct and station within Vadodara
• Viaduct between Vadodara and Ahmedabad

L&T has tied up with a Japanese consortium, IHI Infrastructure Systems, to implement these projects.

#2 IRCON

Established in 1976 as a railway construction company, Ircon International is an integrated engineering and construction company.

It's a leading company in India's infrastructure development. It undertakes technologically complex infrastructure projects across various sectors, including railways and highways.

As a public sector enterprise, the company has a strong government backing. This has helped the company secure several orders over the years. Over the last 50 years, the company has delivered over 400 projects in India and 130 projects across 25 countries.

The company's core focus areas include railway and highway construction, engineering, and construction of EHV substations and mass rapid transit systems (MRTS).

While it delivers projects across all segments, the Indian Railways is its main contributor to revenue with over a 90% share.

The company boasts a robust order book, ensuring a steady stream of projects over the next 1-2 years. One these projects is the bullet train.

IRCON has tied up with DRA Infracon to implement the viaduct and related works within Ahmedabad of the bullet train project as well as the Ahmedabad bullet train station.

#3 HCC

Hindustan Construction Company (HCC) is principally engaged in the business of providing engineering and construction services, real estate, infrastructure and urban development and management.

It is one of the oldest infrastructure and construction companies in India.

It has been in the news over the past two years due to fundamental improvements in the business.

In December 2022, HCC announced the completion of its debt resolution plan. The goal was to bring down the company's interest payments. It received support from 23 banks and financial institutions.

Under this plan, HCC transferred over Rs 28 bn of liability along with beneficial economic interest in arbitration awards and claims of Rs 65.1 bn as consideration to a Special Purpose Vehicle (SPV).

Then in July 2023, National Company Law Tribunal (NCLT) approved a Rs 18.1 bn resolution plan for Lavasa as Darwin Platform Infrastructure emerged as the winning bidder for the company. HCC does not have any control over Lavasa or its subsidiaries.

The resolution process has now cleared a major dark-cloud hovering over HCC and the company is in a far better position because of it.

These major fundamental improvements in the business, has allowed HCC to bid for large orders again. One of them is the bullet train project.

Along with Megha Engineering, HCC is implementing the underground bullet train station at Bandra Kurla Complex (BKC) in Mumbai.

Two Unlisted Companies to Track

Apart from the companies mentioned above, there are two big ones involved in the bullet train project. If these companies announce listing plans, there will be a lot of excitement around them in the stock market.

#1 Tata Projects

Tata Projects is the Engineering, Procurement, and Construction (EPC) arm of the Tata group.

Its CEO, Vinayak Pai, has recently announced that the company has returned to profitability in FY24.

The company managed this due to a strategic realignment in the business, internal organisational changes, and a focus on operational efficiencies.

As per the CEO, Tata Projects is now looking to deliver steady profits by implementing sustainable and predictable projects.

The company has completed several landmark projects recently. These include the new Parliament building, Atal Setu, a solar manufacturing plant for First Solar, several hundred km of the dedicated freight corridor, and a wind tunnel for ISRO.

The company is also involved in the bullet train project. It has recently bid for packages for the bullet train project in a consortium with two listed companies, NCC Ltd and J Kumar Infra Projects Ltd.

#2 Afcons Infrastructure

Formerly known as Asia Foundations and Construction Limited, Afcons Infrastructure is the construction business of the Shapoorji Pallonji group. The company has a long and distinguished history and reputation.

In the railway sector, the company is heavily involved in metro projects. It has completed metro stations in Delhi, Chennai, Kolkata, Nagpur, Kanpur, and Pune.

The company has also designed and built the famous Chenab rail bridge, the world's highest railway arch bridge.

In the bullet train project, the company is building the underground tunnel between BKC and Shilphata.

There have been rumours in the stock market of a potential listing in the past. However, there has never been an announcement to this effect by the company.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...