Rail firms eyes on business opportunities in Tier-II cities metro projects

New Delhi: As mass rapid transportation penetrates cities like Kochi, Jaipur and Lucknow, it throws open opportunities for companies like Alstom, Bombardier and Hyundai Rotem. Contracts for rolling stock, signalling and electric systems have helped these companies put up manufacturing units, too.

Now, the blue print for metro services in two cities in Madhya Pradesh — Indore and Bhopal — is also ready. In all, the government has identified nearly 50 Tier-II cities and towns for modern metro systems, herein, lies the next big wave of business for the companies.

The Indore metro project is expected to come up at a cost of Rs 7,522.63 crore, including financial cooperation from Asian Development Bank (ADB) and New Development Bank (NDB).

The Bhopal metro rail project will come up at an estimated cost of Rs 6,962.92 crore and is being funded by European Investment Bank (EIB).

The expected expenditure in metro rail for India over the next three-five years is about Rs 2.3 lakh crore. Currently, 350 kilometres of route network is under operation. A critical mass has already been achieved and this is only expected to increase significantly in the coming years.

Rail coaches, rolling stock, signalling and other electrical components contribute close to 50-60 per cent of a metro project, hence, this offers a significant opportunity for the suppliers of these equipment, Jagannarayan Padmanabhan, practice leader and director, transport and logistics, CRISIL Infrastructure Advisory, said.

One of the recently unveiled metro services is the Kochi Metro that was inaugurated by Prime Minister Narendra Modi in June. The estimated cost of the metro project is Rs 5,181.79 crore, the total length of the rail line is 25.612 km with 22 stations.

Alstom is undertaking signalling, telecom and electrification solution for the Kochi Metro line. The company"s scope includes design, manufacture, supply, installation, testing and commissioning of Radio communication-based train control (CBTC) signalling solution and supply of onboard equipment for 25 trains. It would provide an integrated telecom solution comprising of radio, master clock, CCTV, passenger information display system, passenger announcement system and Giga bit network.

In a recent report, Icra said that the metro rail sector has seen strong traction in the last couple of years and is expected to provide sizeable opportunities for construction companies over the next three to five years due to a strong pipeline of projects which are in the approval and planning stage.

The Central government encourages cities with above 2 million in population to develop mass transit systems Bombardier is pursuing various metro projects such as Delhi Metro, Bengaluru Metro Phase II, Mumbai Metro Phase III, Vizag Metro and light rail for cities of Kerala.

"Roads and urban infrastructure, including metro rails are two key segments which have witnessed robust order inflows for the construction companies. Further, with a sizeable pipeline of projects in these segments, the construction sector is expected to have sufficient order inflows and companies with strong track record and healthy balance sheet are expected to exhibit strong growth going forward," K Ravichandran, senior vice-president and group head, corporate ratings, ICRA, said in the report.

Canadian major Bombardier, for instance, has a supplier base and over 2,200 highly skilled employees in India. It operates a railway vehicle manufacturing site and bogie assembly hall at Savli near Vadodara, Gujarat. In addition, it has a propulsion system manufacturing facility at Maneja, near Vadodara.

Currently, Alstom, which employs close to 3,000 people, is executing metro-railway projects in Chennai, Kochi and Lucknow. The rolling stock for these has been manufactured at Sri City.

The company is also executing signalling and power supply systems for the 343-km section on the World Bank-funded Eastern Dedicated Freight Corridor.

"We are already playing an important role in several upcoming urban rail projects. Starting from designing and manufacturing completely out of India, to establishing local supply chains, we are well positioned to provide an end-to-end full systems turnkey solution from India and to emerge as the preferred partner for our customer," Bharat Salhotra, managing director Alstom Transport said.

Cities like Kolkata, Chennai, Delhi, Bangalore, Gurgaon, Mumbai and Jaipur already have metro systems. But with nearly 50 cities and towns in line for modern metro systems, Tier-II cities are poised to witness the next big wave.