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Texmaco Rail – Will 2017 be an operational turn-around year?

Published : October 18, 2017

Texmaco Rail – Will 2017 be an operational turn-around year

Texmaco Rail has seen lots of happening since mid of 2016. All these events result in outlines for an operational turnaround case in Texmaco Rail and engineering ltd share price. Moreover, a series of new projects and investment by Indian railway ministry will also be an add-on to its stable revenue growth. These factors are helping Texmaco Rail share to qualify candidature as an Indian share for long-term investment.

The below-mentioned events are expected to help Texrail share price to come out from the current primary downtrend. The technical chart of the share price of Texmaco rail suggests for the downtrend to ends only sustaining above 130 strong resistance levels. Texmaco rail results announcement in coming quarters may strengthen the prospects as well.

The forgoing Indian shares analysis hints Texmaco as a good long-term investment decision, say for 4-5 years.

Texmaco Rail operational turn-around? 

From FY 18 there will be no separate rail budget and it will be the part of the general budget only. This will not have much bearing on railway-related stocks including Texmaco Rail & Engineering Ltd. This is so mainly because of the infrastructure spending push by the government. Meanwhile, this year, railway stocks are also performing well due to optimism that the government will further push infrastructure development in this sector.

Besides GOI commitment of infrastructure spending, some of the developments like MoU with Russia’s Rosoboronexport and Israel’s Lesico group, an amalgamation of Bright power and TexHi-tech into and with Texmaco and strong holding of strategic investors are indicating for strong revenue flow in near future.

All the events and happenings are of long-term nature and hence a long-term view is favoring for positivity in its share price as well. Let’s discuss briefly the happenings.

1. Infrastructure push by GOI

In 2016 the Cabinet Committee on Economic Affairs (CCEA) had approved 1,937 km of railway projects which is worth Rs. 24,375 crore. These projects are spread across nine states. The company had received the new order for manufacturing of wagons from Indian Railways.

The railway ministry is planning to undertake an investment of $140 million over the next five years for the purpose of improving infrastructure and mobility of the railway. Also, the ministry may soon approve $5 billion in funds to finance various infrastructure projects.

All this push by the government will show the positive effect on the earnings of the listed railway vending company in the coming years including that of Texmaco Rail. Texmaco sales nearly doubled in the June quarter of FY 17. Texmaco results in hints for the operational turnaround.

In coming quarters, the results reporting will give further rise in earnings due to all these ongoing projects and approvals. This may enhance share price above 130 levels in the next quarter or two as explained in below paragraph.

2. MoU with Russia’s Rosoboronexport

In August 2016 a memorandum of understanding with Russia Rosoboronexport was signed to jointly produce BMP-3. This memorandum concerns an agreement on the licensed production of Russian armored vehicles by Texmaco and Rosoboronexport will facilitate the transfer of Russian technology during the implementation of joint projects.

3. MoU with Israel’s Lesico group

In June 2017, Adventz Group signed a USD 2 billion MoU with Israel’s Lesico group. The agreement was to collaborate in light rail transit (LRT) projects in Tel Aviv and Jerusalem. Adventz is now Saroj Poddar group and was pioneered by late K.K. Birla. It is a $3-billion India-based conglomerate comprising 26 companies including Texmaco Rail & Engineering Ltd.

Texmaco Rail & Engineering Ltd will build the Tel Aviv Metropolitan Area Mass-Transit System. This will be the first project for an Indian conglomerate. Texmaco’s will lay tracks, install signaling, electrification, control and communication equipment, power sub-stations and command.

4. Amalgamation of Bright power and TexHi-tech into and with Texmaco Rail

Texmaco will merge two of its subsidiary, Bright power, and TexHi-tech with itself. The board has approved this amalgamation in September 2017. This amalgamation is expected to strengthen its position as a total rail solution provider.

Also, the merger will help the company utilize its resources optimally and reduce cost. The creation of the large asset base may result in facilitating access to better financial resources, in the future.

There will be no change in promoters holding post-merger. However, the public holding in Taxmaco will increase by 4.58% and total holding by 2.18% from that of the pre-merger holdings company.

5. Texmaco Rail strategic investors on the ride 

An inquiry in the recent shareholdings of K. K. Birla Group’s company Taxmaco revealed that more numbers of shares are being accumulated by strategic investors that are being sold. With Rs. 2193.83 crore of market capitalization and 21.96 crores of outstanding shares, only 42.41% of the outstanding shares are the free float. Strategic investors and promoters hold the remaining 57.59% stake in the company.

Among strategic investors, 19 institutions hold 27.36% in the company. As per the latest Reuters data on institutions holding, two new institutions initiated their holding in the company. Furthermore, three increased position while six reduced their position in the company.

The recent interest by these global and national strategic investors are of long-term nature. And the benefits of such investments will certainly start bearing fruits in the quarter to come. Hence, it will be a good investment bet.

Texmaco Rail to move towards 130 – above which rally expected

The share price of Texmaco Rail was rising since July 2013 but after making a high of 171 levels on February 23, 2015, its price is following the primary downtrend. Further, the share price has touched its 52 weeks high of Rs. 117.85 on 19-Dec-2016 and the 52-week low of Rs. 83.25 on 07-Aug-2017.

On the weekly chart, the price formed a head and shoulder pattern which completed on the week ending July 04, 2016. A new ranging movement initiated thereafter with downside biasedness. It is following a range of 118 levels and 80 levels since the beginning of 2017.

Another observation on Texmaco Rail technical chart is that post 171 highs the stock was trending inside a downward falling channel, giving rise to primary downtrend. Prices are also taking support at the lower line of the channel. And this may help to break 130 resistances, the upper part of the channel. Above it, a new set of uptrend may trigger and put out the price from the primary downtrend.

What is more, than the share prices of the Texmaco Rail are trading below fifty and twenty-period simple moving averages. Several bearish engulfing patterns on the chart resulted in prices to weaken. Also, one of the technical indicator, stochastic is indicating for some further bearish movement in the prices of Texrail.

Currently, the share price of Texmaco is trading around 100 levels and if price continues below 101 support, it will then move further downside. Below 101 levels support is at 89 levels and then at 81 levels.

About Author

Saurabh Mittal
Saurabh Mittal

Founder and promoter of the Raghunandan Money Group, Mr. Saurabh Mittal is a Management Graduate having rich and extensive experience of more than 19 years. He has an in-depth knowledge and a strong understanding of various intricacies of Financial Markets. It is through his exceptional leadership skills and outstanding commitment towards the group that Raghunandan Money today has become the leading Broking House with an extensive client base and widespread network of sub brokers & branches. His efforts have led to the diversification of group businesses from Equity & Commodity Broking to Depository Services, IPOs & Mutual Funds distribution, Insurance Products, Wealth Management, Advisory Services and Financial Education. Under his leadership, the organization has rapidly expanded and made a widespread presence across India and has seamlessly grown into a financial services company par excellence.

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