Kavach Expansion 2025: Key Railway Stocks to Watch for Growth?

India's indigenous train protection system - Kavach - is changing the way the railways operate.

Using radio links, it captures real-time signalling and locomotive location data, processes it, and enforces movement authority limits, to ensure trains operate safely. It will reduce the risk of collisions, over speeding, and signal violations.

So far, the system has been installed in 168 locomotives in the city of Mumbai - 50 trains under the Central Railways (CR) and 118 locomotives belonging to the Western Railways (WR).

The installation of the safety system in all locomotives operational under WR is set to complete by December this year, according to railway officials.

With this in mind, here are 3 stocks to watch...

#1 HBL Engineering

First on the list is HBL Engineering.

Previously known as HBL Power Systems.

The company designs, develops, and manufactures various types of batteries, e-mobility products, and other products. Its business segments include industrial batteries, electronics, defence, and aviation batteries.

The company's flagship products for the railway sectors include TCAS (Train Collision Avoidance System) for safety and TMS (Train Management System) for efficient track utilisation.

It's one of the primary manufacturers of the Kavach system and has been involved in several projects with Indian Railways, including significant contracts for deploying the system across railway tracks and locomotives.

On 24 September 2024, HBL was the first Kavach OEM to demonstrate the functioning of the system with new specifications from Kota to Sawai Madhopur.

In recent months, the company has secured several major Kavach orders:

• 1 May 2025 - A contract from Western Railway
• 27 May 2025 - A contract from IRCON International
• 14 and 15 June 2025 - Contracts from South Central Railway

This highlights HBL's strong project pipeline and growing role in India's railway modernisation drive.

The management expects rail signalling to become the largest business segment by FY30, with Kavach sales projected at Rs 13-15 billion (bn) annually during FY26-28 before tapering off.

However, this will be offset by rising demand for Train Management Systems (TMS) and Centralised Train Control (CTC).

By FY30, electronic fuses are expected to emerge as the second-largest business. Supported by ongoing R&D and a diversified product portfolio, HBL aims to achieve Rs 45 bn in sales by FY30.

For more details, see the HBL ENGINEERING company fact sheet and quarterly results.

#2 Kernex Microsystems

Next on the list is Kernex Microsystems.

The company is involved in safety systems, software services, and other services for sectors like railways, telecom, defence, water management, and others.

It has a production capacity of 100 Kavach units/month which can scale up to 250 units/month, 10 level crossing gates/month, which can scale-up to 25 units/month.

Its railway safety systems include the train collision avoidance system, moving blocks, train protection & warning system, and more.

In July 2025, the company received an order from Southern Railways for the upgradation of the Kavach railway safety system from Version 3.2 to 4.0.

The project will cover the section from Sadashivpet Road to Bidar - Parli Vaijnath - Parbhani under South Central Railway. The contract is to be completed within 24 months.

For more details, see the KERNEX MICROSYS company fact sheet and quarterly results.

#3 RailTel Corporation of India

Last on the list is RailTel Corporation of India.

The company is a Miniratna PSE that provides telecom infrastructure throughout India. It provides a range of telecom services like virtual private networks, internet leased in line, etc, and other project work services.

RailTel has been playing a key role in modernising train operations, with expertise in signalling and communication systems. It has already executed Kavach implementation in the East Central Railway (502 kms) and continues to actively participate in all eligible tenders for this safety technology.

In July 2025, the company secured a Rs 2.6 bn order from East Central Railway for the implementation of Kavach across 607 route kilometres of low-density railway track. The project is expected to be completed by 14 July 2027.

Its current order book is around Rs 72 bn, of which nearly Rs 5 bn is Kavach orders - revenue generation for which is expected next financial year onwards. About 30% of its orders are from the Indian Railways.

As the Indian Railways accelerates the nationwide deployment of Kavach, RailTel stands to capture a share of this growth story.

For more details, see the RAILTEL CORP OF INDIA company fact sheet and quarterly results.

Conclusion

Indian Railways is moving quickly to roll out Kavach, the indigenously developed Automatic Train Protection (ATP) system, across its entire network. The ambitious plan is to equip 10,000 locomotives over the next five years.

As the railway network continues to expand and safety remains a top priority, companies involved in the design, manufacturing, and implementation of Kavach systems should be on your watchlist.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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...