Rail Vikas Nigam Ltd Management Discussions

Industry Structure and Development:

Indias logistic market is more than 300 billion dollar and the logistic cost is around 16% of the countrys economy. To meet the demands of growing economy and to be at par with International standards, the logistic cost has to come down to 8%. The Indian logistic market is poised for significant growth, with estimates suggesting it will reach 484 billion dollar by 2029, growing at a compound annual growth rate (CAGR) of 8%. Gol has taken initiative by notifying the logistic policy in Oct. 2021. One of the pillar as highlighted in the logistic policy is ·Ease of Logistics (ELOG) by developing more and more of Railway Infrastructures.

India has the fourth largest Railway network in the world with a total length of 69181 route kilometer (rkm). Indian Railways runs a staggering number of trains daily, exceeding 22,000, out of which around 13198 are passenger trains that carry more than 18.87 millions passengers and about 11,724 freight trains that carry around 4.34 million tonnes of freight per day. The humungous magnitude of operations on Indian Railway can be appreciated from the fact that every day it moves people nearly equal to the population of Australia.

In the recent past, various railway reforms have been initiated at the organisational and functional level to enhance efficiency, safety, innovations and transparency and to achieve faster project execution. Participative models for rail connectivity, introduction of private train operators and the focus on encouraging participation of the private sector in infrastructure upgradation and station development are noteworthy reforms.

Indian Railways has prepared a National Rail Plan (NRP) for India - 2030 which envisages to create a "Future Ready" Railway system. The NRP is aimed to formulate strategies based on both operational capacities and commercial policy initiatives to increase modal share of the Railways in freight to 45%. The objective of the Plan is to create capacity ahead of demand by 2030. As part of this Plan, Vision 2024 has been launched for accelerated implementation of certain critical projects by 2024 such as electrification, multi-tracking of congested routes, upgradation of speed to 160 kmph on certain routes, upgradation of speed to 130 kmph on all other Golden quadrilateral - Golden Diagonal routes and elimination of all Level Crossings on such routes. While new sections are being progressively commissioned for traffic in the Eastern and Western Dedicated Freight Corridors, new Dedicated Freight Corridors have been identified and expansion of rail networks in Jammu and Kashmir and North Eastern region of the country is being emphasized. Railways a net-zero carbon emitter by 2030.

Many new improvements, such as self-designed Vande Bharat Express, Tejas Express, Vista dome Coaches, new Signalling Systems, Long Haul Freight Trains, High Capacity and High-Speed wagons, Kisan Rail, Solar powered passenger coaches etc have been undertaken to bring about sea change in customer comforts and expectations. Innovative improvements are also being brought upon by assimilating new technologies in the form of SMART Coaches, SMART Locomotives, SMART Yards, Automated Train Examination System, Automatic Train Protection, Centralized Traffic Control and Train Management System etc. Deployment of Anti-Collision Device (ACD) Network (Raksha Kavach) in the entire length and breadth of Indian Railway is another major initiative to ensure safety in rail travels.

Indian Railways is considered the countrys lifeline for transporting passengers as well as cargo. To remain competitive vis-a-vis other transportation modes and to provide optimum level of service to passengers and for freight, there is an acute need to invest in railway infrastructure to augment capacity, expand the network and make it more efficient and customer centric.

Role of Rail Vikas Nigam Limited:

Rail Vikas Nigam Limited (RVNL), a Navratna CPSE under the Ministry of Railways, has created state- of the-art rail transport capacity and has been a key player in Indias Infrastructure development since its inception in 2003. RVNL is executing projects on a fast track basis by adopting international project execution, construction, management practices and standards. RVNL has completed over 157 projects contributing significantly to the nations railway network and economic growth.

RVNL was incorporated with an objective to undertake rail project development, mobilization of financial resources and implementation of rail projects pertaining to strengthening of golden quadrilateral and port connectivity and raising of extra- budgetary resources for project execution. RVNL is in the business of executing all types of railway projects including new lines, doubling, 3rd line/4th line, gauge conversion, railway electrification, metro projects, workshops, mega bridges, hilly railway projects, construction of cable stayed bridges, institutional buildings etc.

RVNL has been functioning as an executing arm of Indian Railways and works for and on behalf of the Ministry for projects assigned to it for execution. It generally works on a turnkey basis and undertakes the full cycle of project development from conceptualization to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management, etc.

The projects are spread all over the country and for efficient implementation of projects, 29 Project Implementation Units (PIUs) established at 25 locations to execute projects in their geographical hinterland. They are located at Ahmedabad, Ambala, Agra, Bengaluru, Bhopal, Bhubaneshwar, Chennai, Chandigarh, Guwahati, Jhansi, Kanpur, Kolkata, Kharagpur, Kota, Lucknow, Mumbai, Nagpur, Patna, Pune, Raipur, Rishikesh, Ranchi, Secunderabad, Varanasi and Waltair.

Two Operational units are also established outside India, one is at Maldives & another is at Rwanda. The PIUs are established and closed as per requirement.

RVNLs major client is the Indian Railways and other clients include various central and state government ministries, departments, and public sector undertakings. RVNL is also participating in Metro, Highways, Roadways, Ports, Transmission line, Irrigation, Signalling works, MMLPs and other infrastructure sectors through competitive bidding.

In last 3 years, there has been a paradigm shift in functioning of RVNL. RVNL has gone into the market for winning projects through bidding. Till 31 of March, 2025 it has participated in bids worth more than Rs. 2,27,000 crores of projects, and has won Projects/ awarded/ declared L1 for about Rs. 49,000 Crore.

The first two projects won by RVNL in the open market, viz. Indore Metro projects have progressed extremely well. Since 2021, RVNL has diversified by winning large number of projects in different sectors such as Metro segment, Irrigation, Road Sector, Municipal Corporation (Ahmedabad). First overseas project in Maldives is also progressing very well. Thus, RVNL has transformed itself from #LocalRaillnfra to #GlobalRaillnfra.

RVNL combines the efficiency of Private Sector and trustworthiness of Govt. Sector. In last 14 years, RVNL have been rated excellent by DPE which is a huge recognition by GOI and it is a manifestation of persistent excellence. For RVNL, excellence is a prevailing attitude and not an exception. RVNL has been pioneer and trail blazer for PPP model for creation of Rail Infrastructure.

RVNL has commissioned more than 16,500 KM of Railway infrastructure. The project expenditure was Rs. 1.75 lakh as on 31.03.2025.

Disinvestment of Government of India holding in RVNL:

„ IPO (April 2019)- 12.16%

„ OFS (March, 2021)- 9.64%,

D OFS (July, 2023)- 5.36%,

As part of its original mandate, RVNL has successfully set up five project specific Special Purpose Vehicles (SPVs) for execution of important rail connectivity projects in PPP mode. Five SPVs have already been commissioned for traffic. More SPVs are in different stages of being set up under Indian Railways participative policy framework.

RVNL had recognised the vast potential for building a High-Speed Rail Network in the country and with the approval of President of India, had formed High Speed Rail Corporation of India Ltd. (HSRC), as its subsidiary. Feasibility studies for Delhi-Kolkata, Delhi-Mumbai, Mumbai-Chennai and Delhi- Chandigarh Amritsar have been undertaken by HSRC. Subsequently, HSRC has been renamed as HSRC Infra Services Limited (HSRCISL) and repurposed to manage in bidding of projects for RVNL and to provide project management consultancy services.

Swot Analysis

Strengths

RVNL has successfully mobilized funds for the construction of new lines by creating project specific SPVs with strategic stakeholders. Its large capital base can be leveraged to raise funds as per its original mandate.

Ministry of Railways has delegated the authority to RVNL for sanctioning of estimates within prescribed limits and for awarding contracts of any value for the projects in hand enabling RVNL to implement projects faster.

As RVNL can award large value contracts, it has been able to attract the best infrastructure companies in India.

It has developed expertise in undertaking all stages of project development - from concept to commissioning.

RVNL has built the requisite skills and experience to follow ADB procedures for contracting and ensure resettlement and rehabilitation of project affected persons to implement socio-economic safeguards.It has introduced large-scale mechanization in all aspects of construction to achieve high quality output.It has refined its tendering processes and introduced innovative concepts like multi- package tenders resulting in faster decision making and savings in overall costs

It has a sound and robust financial management system, allowing for effective monitoring and control of expenditure.HSRCISL, a subsidiary of RVNL, is available to provide consultancy service and also for implementation of high-speed corridors in the time to come.RVNL has set up a Business Development Cell to participate in competitive bidding process in Infrastructure Sector.

WeaknessesRVNL used to be dependent on the Ministry of Railways for funding of projects which is critical for the future growth of the Company and for timely implementation of projects.RVNL is also depending upon MOR on sanction of the revised estimates.

RVNL has not been notified as a Zonal Railway and accordingly does not have the authority to approve drawings, designs etc.As per the MOU executed in October 2003, RVNL was mandated for obtaining sanction from Commissioner of Railway Safety but subsequently the same was withdrawn in November 2007. Authority for CRS sanction shall expedite the project commissioning and enhance the project delivery.The progress of projects often gets impaired on account of delays in securing the necessary approvals for plans, granting of traffic blocks, etc. from Zonal Railways. a Changes in approved plans by the Railways, during execution of projects, result in delays.

0 RVNL has to depend on Railways for traffic blocks for execution of projects which causes delays.The projects taken from market are new and likely to face new kind of challenges.

Opportunities</p>

0 RVNL is implementing Rishikesh · Karnaprayag project in the Himalayan region and can also take up more such projects in hilly terrain and also projects located at strategic locations,With the work of execution of Kolkata Metro projects, RVNL has developed expertise for implementation of metro projects in other cities across the Country.a RVNL has successfully constructed major workshops for Indian Railways in fast track mode. RVNL can thus undertake implementation of large buildings, factories, townships etc. for other agencies as well.

0 With RVNLs growth as a major provider of a variety of rail infrastructure, there is an opportunity of securing rail infrastructure projects overseas.RVNL can play a significant role in raising extra-budgetary resources for project execution as this is a specific mandate of the Company and has experience of implementation of projects in PPP mode.

a RVNL has already shown capabilities in execution of marine works in overseas.

ThreatsThe shortage of technical manpower in market/Railways with required experience in the Rail sector, is a major constraint in the delivery of projects.

a A large percentage of RVNL workforce are deputationists from Indian Railways. Any adverse policy decision may result in railway officers not being available for deputation.

„ Land acquisition issues require to be resolved expeditiously so that the progress of projects is not hampered.

„ Delays in clearances for project execution such as tree-cutting, removal of utilities from the construction of viaducts for metro rail projects etc.

„ A number of projects are being executed along existing running lines, which makes safety a serious challenge.

, Projects are adversely affected due to poor law and order conditions such as those in Left Wing Extremists affected districts.Stoppage of work by MOR on nomination basis and withdrawal of power to sanction estimates.

s Not following the approved revenue stream at the stage of revised estimate shall affect the financials of RVNL.

Industrial Relations: Industrial Relations remained harmonious and cordial.

Strategies

The Company is taking measures for ensuring cost control and timely delivery of projects, without any compromise on quality for the execution and delivery of rail infrastructure projects on a fast track basis. RVNL can play a significant role in Ministry of Railways efforts of raising extra-budgetary resources for project implementation, especially through the SPV route. Innovative models for project financing will also have to be explored. RVNL has also requested Ministry of Railways that it may be permitted to leverage its equity base to raise funds from the market as per its mandate.

RVNL has created a permanent cadre through absorption to provide institutional continuity and to reduce the dependence on seeking officers and staff on deputation from Railways. Most of the workforce consists of qualified technical staff with experience in Railways and/or its PSUs. Wherever required, RVNL has also recruited specialists to provide expert guidance in its project implementation.

A comprehensive and appropriate training programme is being implemented to develop competent, suitably skilled and qualified manpower. Efforts are also being made to transfer skills and best practices from other infrastructure sectors and acquiring skills related to execution of Railway projects.

The Mission, Vision and Objectives of the Company are mentioned below:

Mission

To be a leading Construction Company of India with presence in all infrastructure domains, both within the country and outside.

Vision

To build world-class durable infrastructures with the latest technologies and designs following the best quality and safety standards.

Objectives

a To undertake and execute successfully project development, financing and implementation of projects relating to infrastructure of all kind.

„ To build, maintain, sustain, project implementation teams, ready to launch execution of projects won, with commitments to timely execution and highest level of technical standards.To mobilise financial and human resources for project implementation timely execution of projects with least cost escalation. To maintain a cost-effective organisational setup.

a To foster a culture of continuous learning within the Organisation, and to constantly upgrade to innovative technologies and collaborative practices, in order to build and sustain a future-ready work force and managerial platform.

„ To permeate a philosophy of sustainability within the Organisation, by a continuous internal conversation with employees, partners, associates and consultants, and to promote professional integrity, mutual trust & care.

Outlook

The Company proposes to expand its operations independently and through its Subsidiary Company which will undertake the siding construction, siding maintenance, procurement of machines for operation and maintenance, PMC/GC services, solar panel work, Transmission line work, Export of wagon/coaches, Cranes etc, construction of Metro and HSRC and also include biding in the open market and thus it would be bidding arm of the parent Company i.e. RVNL.

Concerns

Over a period of time, it is noticed that there is a huge outstanding share of project expenditure due from State Government/Union Government e.g. Government of Andhra Pradesh, Telengana, Himachal Pradesh, Maharashtra. Such committed funds from State and Union Government have got bearings on project delivery.

Delays in land acquisition, finalization of plans by users, timely clearance of permissions from other government departments (mainly Ministry of Environment and Forests), law and order problems, and the continued support from Ministry of Railways are main concern areas in project execution. The capacity constraints of agencies capable of delivery of large value rail infrastructure projects will also have to be addressed to ensure the successful and timely completion of projects.

Internal Control Systems

Effective internal control systems have been put in place for monitoring the implementation of projects including periodic reviews of the physical and financial progress, evaluation of efficiency of cost control measures based on inputs of both the Technical and Finance Departments.

Reviews of the progress and nature of expenditure is regularly conducted by the Finance and Accounts Department and reports thereon are submitted to Management. Budgetary reviews are also conducted.

The Company has laid down and developed a framework of internal financial controls, with reference to financial statements and reporting and such controls are adequate and operating effectively. A system of internal audit by an external firm ensures the efficacy of control systems and also submission of comments on the appropriateness of incurrence of expenditure, and their accountal by the Company. The reports of the internal auditor are periodically reviewed by Audit Committee of the Board of Directors and implementation of recommendations are monitored. The Annual Accounts of the Company are also subject to scrutiny by the Statutory Auditor appointed by CAG and Audit by CAG.

Financial Performance (Standalone Financial)

The Company recorded total income of Rs.20,888.24 crore compared to Rs. 22,915.13 crore in the previous year. Profit after tax for the year 2024-25 is Rs 1,188.62 crore as against Rs. 1,462.95 crore in the previous year. During the financial year, the Company has earned a turnover of Rs 19,869.35 crore as against Rs. 21,732.58 crore of previous year.

Key Financial Ratios:

Human Resource Development and Industrial Relations

Rail Vikas Nigam Limited endeavors at enhancing the capabilities of the organization in acquiring, developing, motivating and retaining its human resources in an environment in which team work and cooperation among employees contributes to the growth and wellbeing of individual employees as well as the organization as a whole. Emphasis is laid on employees maintaining work life balance.

To strengthen its position, the Company has formed a nucleus of its own permanent cadre through an Absorption Policy along with a Recruitment & Promotion Policy as approved by the Board of Directors of RVNL.

Cautionary Statement

Statements in the Management Discussion and Analysis Report describing the Companys strengths, strategies, projection and estimates are forward looking statements and progressive within the meaning of applicable laws and regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, government policies and other incidental factors. Readers are cautioned and not to place undue reliance on the forward looking statements.