realizing valuation of spin off units of indian railways

7/27/2019 Realizing Valuation of Spin Off Units of Indian Railways

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1

Transformation for growth

environment.Spin off units to take Railway to higher growth

trajectory.


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Challenging growth environment

Transformation required

Spin-off company advantages

Can spin off units take Rly to higher growth

PSUs of IR

Railtel


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5

Challenges for Indian Railways

Capacity Enhancement

Modernization of Track, Rolling Stock &Signaling System

Competition from Road Sector

Safety Considerations- Loss on account ofAccidents (Approx. 58 Cr.)

Social Burden (Approx. 15700 Cr)


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7

Source: Report of Expert Group on Railway Modernization

Total Investment Requirement Rs 8,39,140 Crores

Fund from various sources Rs 8,22671 Crores

Gap to be funded Rs 16,469 crores

Anticipated Requirement of Funds


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8

Resource Constraints Internal surplus

Budgetary support


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9

OTHER MODES OF FINANCING

Bonds Leasing of Assets

PPP

Spin Off Units


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Area Potential savings to RLY (In Rs Cr)

Security services 640

Linen management 40

Medical services 540

General maintenance 450

Luggage handling 175

Catering 700

Recruitment 100

ANTICIPATED REVENUES FROM SPIN OFF ACTIVITIES


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TURNOVEROF SPIN OFF UNITS VIZ RAILTEL /RVNL/

RITES/ CONCOR/KRCL/IRCON

UNIT 2009-10(Rs. In Crore)

2010-11(Rs. In Crore)

RAILTEL 408 363

CONCOR 3705 3828

RITES 623 881

KRCL 588 924

RVNL 1743 1445

IRCON 3153 3175


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http://www.google.co.in/imgres?imgurl=http://www.etftrends.com/wp-content/uploads/2010/06/spinning_top.jpg&imgrefurl=http://www.etftrends.com/2010/06/claymores-spin-off-etf-making-gains/&usg=__PgFbGdowjHe6rK_xIUCXgUREWgw=&h=425&w=457&sz=10&hl=en&start=3&zoom=1&tbnid=yi88Ka4aEAhJFM:&tbnh=119&tbnw=128&ei=mo_FT-XnCNCtrAfekLisBQ&prev=/search%3Fq%3Dspin%2Boff%26hl%3Den%26safe%3Doff%26gbv%3D2%26tbm%3Disch&itbs=1


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Objectives of setting up of Spin off Units

Management reasons (Parent companies engaged in diverseoperations, but cannot provide effective management, financial, and resource

support that the subsidiary needs for continuous growth)

To generate revenues

Risks

Tax benefits

Marketing factors, and

Regulatory/legal reasons


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Characteristic of Spin Off Units Parent companies i.e. Indian Railways may focus

their attention and resources on their coreoperations.

Consequently, the spin-off allows the spun-offcompany to negotiate management, finance, andresource issues with its own board of directors andto make decisions for itself.

Spin-offs enable managers to focus on the specificoperating and financial characteristics of thesubsidiary


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Formed in Sept 2000, a PSU owned by

Railways Authorised Capital of Rs. 1000 Cr.

Assets: Railways RoW along 63000 route km forestablishing OFC network connecting 7000stations

1000+ Towers for co-location

RailTel is building multimedia telecom networkusing SDH/DWDM based transmission systems

and high end MPLS-IP routers.

Railtel


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Objectives of RailTel Expeditiously modernize Railways Operational and Safety

systems.

Create a nationwide broadband telecom and multimedia

network to supplement national infrastructure to spur growth

of telecom, internet and IT enabled value added services in all

parts of the country especially rural, remote and backward

areas.

Generate much needed revenues for implementing Railways

developmental projects, safety enhancement and assets

replacement programs.

RAILTEL OFC NETWORK STATUS


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RAILTEL OFC NETWORK STATUSOFC Laid 42168 kms

OFC (Optical Fibre Cables) Lit 38112 kms

DWDM (Digital 10500 kms

STM-16 28362 kms

STM-4 13571 kms

STM-1 33722 kms

Total POPs 3948

STM-16 POPs 834

POPs available at every 8-10 Kms


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Rly Connectivity

Total Zones

OFC Comm.

Zones on MPLS

With switch

1616

14

2(Hubli &Gorakhpur)

All zonal HQ have OFC with Ring protections

Total Divisions

OFC Comm. Divisions on MPLS

With switch

67

67

27

36

59 out of 66 divisions have OFC with Ring protections


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> Supporting Data Connectivity For PRS, UTS, FOIS, AFRES etc.

> MPLS (Multi Protocol Level Switching) Based WAN For Railnet

> Managing CUG Mobile For 1.75 Lac Employees

> Interconnection of Railway Exchanges on NGN (Next

Generation Network)

> Deploying DSLAMs (Digital Subscriber Line Access

Multiplexer) For Provision Of Broadband In Rly Colonies

SERVICES TO RAILWAYS


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Achievements & contribution of RailTel

Building up of OFC infrastructure 38000 kms multi ring OFC network up & running

Creation of nationwide broadband STM-16 network withcentralized Network Operation Center (NOC) and DWDMnetwork

OFC network connects 16 zonal Railways & 68 divisions and withWIP in 1 division

Laying of OFC in ducts since last 6 years and now using G652(d)

fibre for better dispersion characteristics for future DWDMdeployment.

Outsourced maintenance of OFC cablesnow with penalty ifrestoration time is more than 8 hours

268 links of NKN of 1 G capacity being rolled out


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RailTels SWOT Strengths

Large OFC backbone POPs at more than 3800

stations

MPLS backbone network

1000 MW towers

Weakness

Poor QOS due to too manycuts

Delay in implementation and

project executions

Last mile connectivity

Marketing

Opportunities

Low penetration in urban

and almost nil in rural Captive Railway users

Expected boom in

broadband penetration

Liberalisation in license

conditions

Threats

Cut throat competition

Falling prices Difficult to compete with

integrated players

Building of infrastructure

by existing operators


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RAILTELS CUSTOMERS

M/S. TATA TELE SERVICES M/S. BPL MOBILE

M/S. RELIANCE Infocom & RTL M/S. HUTCH ESSAR

M/S. TTML M/S. IDEA CELLULAR

M/S. PATNI COMPUTERS M/S. BSNL

M/S. DISHNET DSL M/S. AIRTEL

M/S. SIFY M/S. MOTIF

M/S. STPI M/S.AIRCELL DIGILINK

M/S. ENIL (TIMES OF INDIA GROUP) M/S. MANTHAN CATV

M/S. CABLECOMM M/S. YOU Telecom

M/s CDAC M/s GTPL M/s DEN


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What Railtel can do for IR

Real time based information

Onboard services to the passenger including broadband

internet, content on demand (audio/video), etc.

Onboard surveillance and remote monitoring

Creating knowledge network for training and enhancing skill sets

of its own staff as well as those of industry professionals by

integrating it with various industry institutions and vendors.

Implementing exclusive Railways ERP/HRMS/Asset

management applications.


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34.4660.44

114.32

117.85

164.02

408.53

363.07

0

50

100

150

200

250

300

350

400

450

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

REVENUE

(In

Cr)

RAILTEL TURNOVER


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The way ahead Convergence into a common network

platform based on next generation

technology.

Real time based information for effective and

efficient Train operations, passenger

management system, emergency and relief

operations, etc.


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Future Growth Plans TP (Tele Presence) (Rs.1000 Cr. Per annum

with 30% growth)

CDN (Content Delivery Network)(Rs. 1000 Cr.

Per Annum with 20% growth) Rail Wire (Rs. 400 Cr per Annum with growth

of 30%)

NOFN (National Optical Fibre Network), willadd Rs. 5000 Cr. Per annum

NKN (National Knowledge Network) will add

Rs. 900 Cr per annum


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Expected Revenue to the Rly with

RailTel activities @ 7% of Turnover: Rs 580 Crores

Expected future Savings for IR

from RailTel : Rs 600 Crores

Expected Savings for IR with Spin

off some activities :Rs 2645 Crores

Expected Earnings for IR from Spin off Units

realizing valuation of spin off units of indian railways

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