Why RITES Share Price is Rising

India's railway sector has witnessed rapid expansion in recent years, driven by increasing passenger and freight traffic.

The government's infrastructure push has further accelerated growth within the sector.

However, the railway industry, faced headwinds following the Union Budget 2024. Budget 2024 did not make any specific announcement regarding the railway sector which hurt investor sentiment.

Speaking of railway sector stocks, RITES also mirrored the trend of the broader sector. Its share price trajectory hit a road block after the budget.

However, in the past five days, the company's share price has exhibited a robust uptrend rising 6.8%.

This unexpected surge against the backdrop of a subdued railway sector has sparked curiosity about the factors driving RITES' exceptional performance.

Let's find out what factors are driving the rally in RITES share price.

#1 Upcoming Bonus Issue

RITES' recently announced that the board of directors will consider issuing bonus shares to shareholders. This discussion will take place at the upcoming board meeting on 31 July 2024.

Investors are showing increased interest due to this potential issuance of bonus shares. Bonus shares are often seen as a positive signal. They indicate the company's confidence in its financial health. This move can boost investor sentiment.

In addition to the bonus shares, RITES will also declare its quarterly results at the same meeting. Investors are eagerly anticipating the financial performance for the quarter. Positive results could further enhance investor confidence.

The dual announcement has created a buzz in the market. The potential for bonus shares and the upcoming quarterly results are driving the share price upwards.

#2 New Strategic Partnership

On 29 July 2024 RITES Ltd signed a memorandum of understanding (MoU) with the National Highways Authority of India (NHAI).

This partnership aims to deliver consultancy services for NHAI projects in highways, bridges, tunnels, and road safety audits. RITES will conduct external technical audits, infrastructure health monitoring, quality assurance, and other related services under the terms of the MoU.

Earlier on 14 June 2024 also the company signed an MoU with Damodar Valley Corporation (DVC), a statutory body under the Ministry of Power.

This collaboration would focus on the comprehensive maintenance and operational management of railway sidings, signalling and telecommunication (S&T) systems, and 25 KV overhead electrification (OHE) isolators across DVC's private railway network in West Bengal and Jharkhand.

RITES will handle the annual maintenance contract for railway sidings, operation and maintenance of S&T systems, and operation of 25 KV OHE isolators.

These strategic partnerships signal to investors that RITES is expanding its business and securing steady income streams.

#3 Big Order Wins

RITES secured significant orders in just two months, boosting its share price.

On 16 July 2024, the Public Works Roads Department (PWRD) of Assam awarded RITES a consultancy contract for third-party monitoring and quality control of 47 roads, totaling 996.7 km, under Asom Mala 2.0.

This project is valued at Rs 501.8 million (m). It is to be completed in 18 months.

On 1 July 2024, Karnataka Mining Environment Restoration Corporation awarded RITES a project management consultancy contract for constructing railway PFTs at Dharmapura and Susheel Nagar in Bellary District.

The order, worth Rs 267.9 m plus GST, is to be executed within 24 months from the date of signing or site handover.

On 6 June 2024, Tata Steel Limited awarded RITES a contract for loco hiring, operation, and maintenance. The project, valued at Rs 396.3 m plus GST, will be executed until 20 April 2027.

What Next?

RITES plans to continue expanding its order book, which stood at Rs 56.9 bn as on 31 March 2024. This includes projects in consultancy, turnkey, exports, leasing, and REMCL.

Significant projects secured in Q4FY24 include consultancy for the PM Vishwakarma scheme, project management for track renewal at Rihand, and engineering services for Tata Steel.

The company is also working on large infrastructure projects like the Sadhna Pass Tunnel and Rabindra Setu health monitoring.

RITES also aims to enhance its international footprint. It has opened a branch office in Abu Dhabi, indicating a strategic move to capture more global projects.

Additionally, the company has secured significant export orders totaling over Rs 12 bn.

It achieved the highest ever consolidated consultancy revenue of Rs 12.9 bn in FY24.

How RITES Share Price has Performed Recently

In the past five days, RITES share price has rallied 6.8%. In the last month, it is up 9.2%.

In 2024, so far its share price has surged 50.1% and it has rallied 62.3% in the last one year.

The stock touched its 52-week high of Rs 826.2 on 27 February 2024 and a 52-week low of Rs 432.7 on 26 October 2023.

About RITES

RITES, formerly known as Rail India Technical and Economic Service Limited, is a Navratna central public sector undertaking under India's Ministry of Railways.

It was incorporated in 1974 and is a multidisciplinary engineering and consultancy organisation providing a comprehensive range of services from concept to commissioning in all facets of transport infrastructure and related technologies.

The company is a leading player in the transport consultancy and engineering sector in India.

It's uniquely placed in terms of diversification of services and geographical reach in various sectors such as railways, highways, urban engineering (metros) & sustainability, airports, ports, ropeways, institutional buildings, inland waterways, and renewable energy.

The company is the only export arm of the Indian Railways for providing rolling stock internationally (except for Thailand, Malaysia, and Indonesia).

For more details on the company, check out RITES financial factsheet and quarterly results.

You can also compare it with its peers.

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RITES vs INOX Green Energy

Happy Investing.

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