Why Railtel Share Price is Rising

Railways stocks have been on a roll for the past few months, with shares of some prominent PSU players more than doubling.

On the other hand, the benchmark BSE Sensex has gained only 10% during the same period.

One among them is Railtel. Shares of the company have turned into a multibagger, delivering 102% returns in the last one year, with over 22% returns in the past five days.

Here's why the shares of this railway stock have been on a roll.

#1 Strong Financial Performance

The 23rd Annual General Meeting (AGM) of RailTel Corporation of India Ltd (RCIL), a Mini Ratna CPSU under the Ministry of Railways, was held on 31 August 2023.

The company's management in the AGM said that despite challenging market conditions and disruptions in the global supply chain, it demonstrated remarkable performance in the financial year 2023.

Over the past five years, it has consistently achieved growth in total income, and in the fiscal year 2023, its income has surpassed Rs 20 bn, reaching a new pinnacle.

Furthermore, its market capitalization currently stands at over 50 bn.

The company is currently engaged in the installation of an IP-based Video Surveillance System (VSS) at more than 5,000 railway stations, with successful completion of the work at 308 stations.

Its order book stands at Rs 48 bn, having a footprint across multiple sectors like railways, IT, defence, health, mining, and more.

Railtel is implementing the project of Tunnel Radio Communication systems for various railway sections.

The comapny further passed a resolution to pay a final dividend of Rs 1.05 per share.

Following the update, shares of Railtel jumped 3% today.

#2 KFON order win

Last week, the company received an order from Kerala State Information Technology Infrastructure for the supply, installation, testing, commissioning, and maintenance of ISP Hardware, Software and License for Kerala Fibre Optic Network (KFON), amounting to Rs 279 m.

KFON operates as a Special Purpose Vehicle (SPV) operation under the aegis of the Government of Kerala.

RailTel's engagement in KFON has seen it lead the implementation of the first phase in collaboration with M/s Bharat Electronics, the consortium's principal member. RailTel has overseen the entire IT segment of this initial phase.

It is worth noting that KFON's mission centres around the facilitation of 30,000 intranet/internet connections to government establishments in addition to providing complimentary internet access to 2000,000 Below Poverty Line (BPL) families.

Positive long-term outlook

In the upcoming budget, the railways have reportedly sought a gross budgetary support of Rs 1.5-1.8 tn over the Rs 1.37 tn figure earmarked during Budget 2022-23.

The allocation could be the highest ever with the likely announcement of around 300-400 new Vande Bharat trains.

Part of the said allocation could also be used towards building new tracks, given the railways' ambitious plan to lay about 100,000 kilometres of new tracks over the next 20-25 years.

With so many triggers for growth, railway stocks could see their share prices rise considerably over the near term.

Further, it is also exploring opportunities in related domains such as the 'Modern Train Communication System' and 'Kavach'.

How Railtel shares have performed recently

The share price of Railtel has surged over 25% in the past week. While over six months they are trading higher by 98%.

Escorts Kubota has a 52-week high quote of Rs 219.6 touched on 1 September 2023 while the stock touched its 52-week low of Rs 94.2 on 29 August 2022.

The stock is currently trading at a PE (price to earning) ratio of 33.6x.

About Railtel

Railtel Corporation of India is one of the largest telecom infrastructure providers in the country. It is owned by the Government of India under the Ministry of Railways (MoR).

This gives it the privilege of owning the exclusive right to lay optical fibre cables and provide telecom-related services along the 60,000-route km of the Indian Railways' network.

Through this setup, it offers a telecom infrastructure that can host other telecom players at railway stations. Besides, it offers diversified services that include telecom networks, data centre, and hosting services, and project execution.

The company also provides project services, including station Wi-Fi, content on demand, railway display network, national knowledge network services and much more.

For more details, see the Railtel Corp Of India company fact sheet and quarterly results. For a sector overview, read our telecom sector report.

You can also compare the company with its peers.

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