Rail Vikas Nigam Ltd Management Discussions.

Industry Structure and Development:

India has the fourth largest railway network in the world with a total network of 68,442 route kilometer (rkm). It runs nearly 22,000 trains daily; i.e. approximately 13,313 passenger trains that carry more than 2.3 crore passengers and approximately 8,000 freight trains that carry around 3.3 crore 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 nearlyequal to the population of Australia. To cope with increasing demand 26 doubling / tripling/quadruplingprojects for 1865 kmhave been included in Budget 2018-19. Pace of construction of new lines doubling, third line and fourth line projects has significantly increased to 6.5 kms per day, Railway Electrification for 2018-19 was targeted at 6000 rkm.

Railway reforms are addressing a wide range of challenges, which includes safety, infrastructure creation, loading punctuality of passenger trains and mail express, Improved customer experience and faster/timely delivery of cargo, [introduction of high-technology trains, locomotives, improved terminals, construction of Dedicated Freight Corridors (DFCs), policy initiatives to increase freight traffic], innovative financing mechanisms [Railways of India Development Fund (RIDF), engaging state governments in participative models for rail connectivity, attracting foreign direct investment (FDI)] and ensuring financial sustainability through non-fare revenues. The focus is also on encouraging the participation of the private sector in infrastructure up gradation including station development.

New initiatives by Railwaysduring the year 2018-19 are introduction of Indiginous semihigh speed train ‘Vande Bharat Humsafar Antyodaya”, "Deendayalu”, "Anubhuti Coaches” and "Glass top Vistadome coaches” aimed at providing better services to passengers, Connecting North East: Indias longest RailRoad Bridge Connecting Assam and Arunachal Pradesh Transformational Reforms speeded up: Emphasis on cultural, process & structural reforms, empowerment/ strengthening of field level units Speedy and Smooth Passenger Services via Improved Coaches and Trains, UTS Mobile App, VIKALP Scheme and boosting Digital Transactions for Online Ticket Reservations Swachch Rail: Bio Toilets, Clean- My-Coach SMS Service.

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 to expand the railway network.

Role of Rail Vikas Nigam Limited:

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, gauge conversion, railway electrification, metro projects, workshops,

major bridges, construction of cable stayed bridges, institutional buildings etc.

RVNL functions 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, 44 Project Implementation Units (PIUs) have been established at 24 locations to execute projects in their geographical hinterland. They are located at Ahmedabad, Agra, Ambala, Bengaluru, Bhopal (2 Units), Bhubaneshwar (2 Units), Chennai (2 Units), Chandigarh (3 Units), Guwahati, Jodhpur, Jhansi, Kanpur, Kharagpur, Kolkata (3 Units), Kota, Lucknow (3 Units), Mumbai, Pune (2 Units), Raipur (2 Units), Rishikesh, Ranchi, Secunderabad (2 Units), Varanasi (4 Units), Vijaywada, Waltair (2 Units). 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 has also recognised the vast potential for building a High Speed Rail Network in the country and with the approval of President of India has formed High Speed Rail Corporation of India Ltd. (HSRC), as its subsidiary. It has been mandated to carry out feasibility studies for the Diamond Quadrilateral of high speed rail corridors across the Country and Delhi- Chandigarh-Amritsar corridor. Accordingly, the feasibility studies for Delhi-Kolkata, Delhi- Mumbai, Mumbai-Chennai, Mumbai-Kolkata

(upto Nagpur in 1st Phase), Delhi-Chennai and Delhi-Chandigarh-Amritsar are currently in progress.

Further, HSRC has also been entrusted with the work of conducting feasibility studies for upgradation of the existing track in the Chennai-Bengaluru-Mysore Section, to raise its maximum permissible speed for passenger trains. HSRC was also the project coordinator for raising the speed on New-Delhi Agra, New Delhi-Kanpur and New Delhi-Chandigarh sections upto 160 kmph. The work of New Delhi-Agra section has already been completed and a train running with maximum permissible speed of 160 kmph has been inaugurated.


• 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 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 developed 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 mechanisation

in all aspects of construction to achieve high quality output.

• It has refined its tendering processes and introduced innovative concepts like multipackage 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.


• RVNL is dependent on the Ministry of Railways for funding of projects which may prove detrimental for the future growth of the Company and for timely implementation of projects.

• RVNL has not been notified as a Zonal Railway and accordingly does not have the authority to approve drawings, designs etc.

• 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.

• Changes in approved plans by the Railways, during execution of projects, result in delays.

• RVNL has to depend on Railways for traffic blocks for execution of projects which causes delays.

• RVNL does not have the freedom to plan execution of projects and has to follow priorities set by Railways.

• RVNL is dependent on Ministry of Railways for approval of projects to be taken up through SPV route and for the terms of the Concession Agreement.


• With the work of execution of Kolkata Metro projects, RVNL has developed expertise for implementation of metro projects in other cities across the Country.

• 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.

• 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.

• RVNL is implementing Rishikesh - Karnaprayag project in the Himalayan region and can also take up more such projects in hilly terrain.

• RVNL has formed a subsidiary company for the development and implementation of High Speed Rail projects - High Speed Rail Corporation of India Ltd. which can provide opportunities for:

-- Implementation of High Speed Corridors in the Country

-- Upgradation of some routes for semi high speed operation as planned by MoR, e.g. Chennai -Bengaluru - Mysore (130 km) etc.


• The shortage of technical manpower, with required experience in the rail sector, is a major constraint in the delivery of projects.

• A large percentage of RVNL workforce is 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, Industrial Relation: 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 as per the Memorandum of Understanding (MoU) are mentioned below:


To create state of the art rail transport infrastructure to meet the growing demand,


To emerge as the most efficient provider of rail infrastructure, with a sound financial base and global construction practices, for timely completion of projects,


• To undertake and execute successfully project development, financing and implementation of projects relating to infrastructure, especially rail infrastructure

• To mobilize financial and human resources for project implementation;

• Timely execution of projects with least cost escalation;

• To maintain a cost effective organizational set up;

• To encourage public private participation in rail related projects managed by RVNL;

• To be an infrastructure Project Execution Company committed to sustainable development and environment friendly construction practices of rail related projects in the country;

• To acquire, purchase, license, concession or assign rail infrastructure assets including contractual rights and obligation with the approval of MoR whenever required.


As per the MoU between RVNL and Ministry of Railways for the year 2018-19, RVNL has been assigned a target to achieve 418.4 km of Doubling/third line/GC/New Line and 425 km of Railway Electrification.


Over the past few years, RVNL has been augmenting its organisational capacity for project implementation and achieved a turnover of द10,060.07 crore in 2018-19. The Company is in a position to further increase the turnover, which however, will be dependent on the continued availability of assured funding from the Ministry or directions with regard to raising of Extra Budgetary Resources.

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.

The poor pace of supply of rails from SAIL has been a matter of concern for the last two years.

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.

Fianancial Performance

RVNL has achieved all time highest turnover during the year 2018-19. The Company recorded total income of द10,332.70 crore compared to द7781.36 crore in the previous year. Profit after tax for the year 2018-19 is द606.59 crore as against द469.66 crore in the previous year. During the financial year, the Company has earned an turnover of द10,060.07 crore as against द7,556.56 crore of previous year with percentage showing an increase of 33.13%. During the year the Company has spent द11.48 crore as against द7.7 crore in the previous year towards Corporate Social Responsibilities.

Key Financial Ratios:

S.No. Particulars 2018-19 2017-18
(i) Debtor Turnover (No of Days) (1) 23 35
(ii) Inventory Turnover (2) NA NA
(iii) Interest Coverage Ratio (3) NA NA
(iv) Current Ratio (4) 1.85 2.70
(v) Debt Equity Ratio (5) 45:55 40:60
(vi) Operating Profit Margin (%) 5.22 5.00
(vii) Net Profit Margin (%) (PAT / Total Revenue) 5.87 6.04
(viii) Return on Net Worth (%) (PAT / Avg. Net worth ) (6) 17.11 14.60

1. Decrease in debtor turnover in 2018-19 is mainly due to reduction in the debtors on account of conversion of part of amount due from the SPV KRCL as equity in the SPV.

2. This information is not applicable as the Company does not carry any inventory.

3. Not applicable as there is no liability on RVNL to serve the debt.

4. Decrease in current ratio is on account of substantial amount received as advance as well as on account of Para (1) above resulting in to reduced trade debtors.

5. Company has borrowed the funds form IRFC for railway projects, for repayment of IRFC loan Ministry of Railways would make available to RVNL the required funds thereafter, to enable them to do the debt servicing.

6. Ratio works out to 4.70:4.41 as per DPE guidelines.

7. Increase in return on net worth during current year in comparison to previous year is mainly on account of increase in operating turnover, coupled with increase in other income.

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.