Best Railway Stock: RVNL vs Ircon International

India has the fourth-largest railway system in the world. Every day, 13,523 passenger trains and 9,146 freight trains are run by Indian Railways across a railway network of 126,366 km.

Despite this, Indians face a shortage of railway tickets and there is a lack of modern amenities.

To improve railways in India, the government has undertaken several projects. The first being modernisation through the procurement of new rail sets and the electrification of trains.

Second is digitisation, to enhance efficiency and safety. It also introduced Kavach, the indigenous Train Collision Avoidance System (TCAS).

With so many developments happening at once, there is a huge opportunity for railway companies.

However, two frontrunners are Rail Vikas Nigam (RVNL) and Ircon International.

Let's examine how these two companies compare across various parameters...

Business Overview

# Rail Vikas Nigam (RVNL)

RVNL is the key execution arm of the Ministry of Railways. This public sector undertaking plays a crucial role in the development and modernisation of the country's railway infrastructure.

The company undertakes a full cycle of project development from conceptualisation to commissioning of railway projects.

Some of the projects it undertakes are doubling, gauge conversion, new lines, railway electrification, and the construction of major bridges. It also undertakes metro projects across various cities.

The company has a track record of completing projects on a fast-track basis. Since its inception, it has contributed to more than 35% of railway doubling and over 25% of railway electrification.

RVNL is also expanding internationally and has completed projects in the Maldives and plans to bid for projects in Abu Dhabi, Oman, and Peru.

# Ircon International

Ircon International, a company that was primarily operating as a railway construction company, is now an integrated engineering and construction company.

It's one of the Navratna companies, and undertakes technologically complex infrastructure projects across various sectors, including railways, and highways.

The company also offers comprehensive project management services, spanning from planning to commissioning, for projects in the railway and highway sectors. It also ventured into real estate projects and undertakes development, construction, and leasing of office spaces.

The company has a strong government backing, which has helped it secure several orders over the years. In the last 50 years, the company has delivered over 400 projects in India and 130 projects across 25 countries.

Some of its clients include BHEL, NTPC, the Ministry of Transport, the government of Sri Lanka, and Bangladesh Railways.

Source: Equitymaster| *As of 19th September, 2025|** as of June 2025

If we compare the two companies in terms of market cap, RVNL is definitely the bigger company.

Its marketcap is 4 times bigger at Rs 757.8 billion (bn) as against Ircon International with a marketcap of Rs 174.3 bn.

RVNL also has a higher order book at 1,010 bn as against Rs 209.7 bn of Ircon International.

RVNL recently won orders worth Rs 1.6 bn from West Central Railway, which led to an increase in its share price.

In the last five days, the share price is up 3.5% and in the last month by 10.5%. However, in the last year, the shares of the company are down 33%.

The shares of Ircon International is down 21% in the last year.

Nifty 50, the benchmark index, on the other hand, is down 2.8% over the last one year.

# Revenue

Ircon International primarily earns its revenue from project management consultancy, engineering, procurement, and construction (EPC) projects, as well as build, operate, and transfer (BOT) or hybrid annuity mode (HAM) projects.

RVNL, on the other hand, generates revenue from the construction and infrastructure projects it undertakes.

In the last five years, Ircon International's revenue has grown at a compound annual growth rate (CAGR) of 15% against 5% for RVNL.

Strong order book and rapid development in railway infrastructure supported Ircon International's strong revenue growth.

For RVNL, on the other hand, saw its revenue drop in the last two years due to slow execution. For FY26, the company has secured several orders that can help improve revenue growth.

Revenue

Source: Equitymaster

# Profitability

It's important to assess the profitability by assessing its EBITDA and net profit growth, and profit margins.

In the last five years, RVNL's and Ircon International's EBITDA have grown at a CAGR of 5.6% and 7.1% respectively, on account of the cost-plus nature of their operations.

The net profit, on the other hand, grew at a CAGR of 5.3% and 13.2% respectively.

Ircon International is leading in terms of profit growth.

The EBITDA margin of Ircon International and RVNL averaged at 13.36% and 10.81% respectively, and their profit margins averaged at 7.3% and 6.4% respectively.

In terms of margins, Ircon International is ahead.

Profitability

Source: Equitymaster

# Debt Management

It's important to understand the debt metrics of a company to assess its fixed financial obligations. The lower the company's debt, the higher its profits will be.

RVNL has a debt-to-equity ratio of 0.5. In the last five years, this ratio came down from 1, which shows the company has significantly deleveraged its balance sheet.

Ircon International, on the other hand, saw its debt-to-equity ratio rise from 0.1 to 0.7 in just five years. As of March 2025, the company's debt stood at Rs 42 bn, as against Rs 25 bn a year ago.

A sharp rise in debt levels is primarily because the company has taken up large projects, which require sufficient funding.

Moreover, 0.7 in the infrastructure industry is not considered extremely high, as the industry has long-term contracts which involve significant delay in payments. Hence, companies end up taking on debt to fund the projects.

For RVNL, the debt as of March 2025 is Rs 54 bn as against Rs 60 bn a year ago. The decrease in debt is due to the repayment of long-term debt as per its strategy to deleverage.

RVNL also receives interest-free mobilisation advances from the Ministry of Railways, which reduces the company's dependence on external debt. Also, the company majorly subcontracts its projects to marquee contractors, which helps keep the debt low.

Even with the company planning to expand to new geographies and undertake projects outside the railways sector, it has enough cash flows to fund expansion plans.

Debt Management

Source: Equitymaster

# Financial Efficiency

To see how efficiently a company is performing, it's important to check the return ratios. The two primary return ratios are return on equity (RoE) and return on capital employed (RoCE).

RoE and RoCE help us understand how much return the company is generating from the capital invested. The higher the ratios, the better.

In the last five years, the RoE of RVNL and Ircon International averaged at 17% and 12.7% respectively. The RoCE of RVNL and Ircon International averaged at 16.2% and 16.3% respectively.

RVNL is leading in terms of financial efficiency.

Financial Efficiency

Source: Equitymaster

# Dividend

A company paying consistent dividends is considered to have stable financials than a company that doesn't pay consistent dividends.

In the last five years, RVNL and Ircon International's dividend per share grew by a CAGR of 1.7% and 12.1% respectively.

Their dividend yield averaged at 3.1% and 3.6% respectively, whereas the dividend payout ratio averaged at 31.4% and 35.7% respectively.

Clearly, both companies are rewarding their shareholders well.

Dividend

Source: Equitymaster

# Valuations

The two important valuation ratios that help in assessing whether a company is undervalued or overvalued are the price to earnings (PE) ratio and the price to book value (PB). A lower ratio is considered better.

The PE ratio of RVNL is 69.6, whereas its PB ratio is 7.8. For Ircon International, the PE and PB ratio stands at 29.1x and 2.7x, respectively.

This means that the shares of RVNL are overvalued compared to Ircon International.

If we compare the shares to their averages both companies are slightly overvalued.

Source: Equitymaster

Which is a Better Railway Stock: Rail Vikas Nigam or Ircon International?

With respect to revenue growth, profit growth, profit margins and dividend payment, Ircon International is ahead of RVNL.

Moreover, its shares are trading at a discount when compared to RVNL.

RVNL, on the other hand, manages its debt better and has slightly higher return ratios.

The company, which has its primary business in India, is now expanding into international markets. It has bid for several projects in Abu Dhabi and Oman and now plans to further expand internationally in solar and infrastructure EPC projects.

It has a strong pipeline in Vande Bharat trains manufacturing and is seeing an increase in projects beyond traditional railways, such as metros, highways, signalling, and electrification.

Ircon International, on the other hand, is focusing on monetisation of its strategic assets. It wants to earn additional revenue by allowing private entities to operate public assets on lease.

The company is also diversifying by tapping into Kavach orders and railway signalling projects. For FY26 and FY27, it's planning to bid for mid-size projects through joint ventures and focus on the execution of existing projects to increase revenue.

Backed by the government's railway modernisation push, expanding metro networks, growing international opportunities, and large-scale highway development plans, both companies are well-positioned to capture strong growth.

However, the real test lies in timely execution. It remains to be seen how effectively these companies can win and deliver projects to translate opportunities into revenue and profits.

As an investor, it is always important to do thorough research on the fundamentals and market opportunities before considering a company for investment.

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.