TM

Trudence Capital
Transrail Lighting Ltd
Nitin Mangal
Co-Founder, Trudence Capital
SEBI Reg. INH000015747
+91 82 249 00 841
[email protected]
About Myself
• Co-founder of Trudence Capital Advisors Pvt Ltd.
• Pioneer in Corporate Governance & Accounting
Research in Indian markets
• Experience: 15+ years
• Guest speaker at October quest by PPFAS, Indian
Investing Conclave, India Acceleration Summit and
many other prestigious conferences.
• Instrumental in the launch of 'Analysis beyond
Consensus’ by Edelweiss
Disclosures
TRUDENCE CAPITAL ADVISORS PRIVATE LIMITED (“Research Entity”) is registered with SEBI as Research Analyst with Registration No. INH000015747. The research entity got
its SEBI registration on March 22, 2024 and is engaged in research and recommendation Services. The focus of Research entity is to provide research and recommendations
services to the clients. Analyst aligns its interests with those of the client and seeks to provide the best suited services.

• Research entity have no material adverse disciplinary history as on the date of publication of this report.
• Research entity has no associates
• Research entity or its associate or Research Analyst or his relative have no financial interest in the securities recommended.
• There are no actual or potential conflicts of interest arising from any connection of Research entity or its associate or Research Analyst or his relative to or association with any issuer of
products/ securities, including any material information or facts that might compromise its objectivity or independence in the carrying on of Research Analyst services. Such conflict of
interest shall be disclosed to the client as and when they arise.
• Research entity or its associate or Research Analyst or his relative, may have actual/beneficial ownership of one per cent or more securities of the subject company, at the end of the
month immediately preceding the date of publication of the research report or date of the public appearance or research recommendation.
• Research entity or its associate or Research Analyst or his relative has no connection or association of any sort with any issuer of products/ securities recommended herein.
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securities, including any material information or facts that might compromise its objectivity or independence in the carrying on of research and recommendations services.
• Research entity or Research analyst or its associates has not received any kind of remuneration or consideration form the products/ securities recommended herein.
• Research entity or Research analyst or its associates have not received any compensation from the subject company in past 12 months.
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or research recommendations.
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Transrail Lighting - Leading Indian EPC
Company
Many Successful Projects

Over 34,000 circuit kilometers of transmission lines.

30,000 circuit kilometers of distribution networks.

In-house manufacturing capabilities for lattice towers, conductors, and poles.

Tower manufacturing plants have a combined capacity of 84,000 metric tons per annum (MTPA),
while the pole and conductor have capacities of 12,000 MTPA and 24,000 MTPA, respectively
Operates in multiple EPC Segments
Financials look eye-catching
Transrail – The Origin Story
GIL Mismanagement
• Revenue de-growth
• Margin Erosion
• Losses surmounting
• Net worth Erosion

GIL (INR crs) Mar-12 Mar-13 9M Sep-14 18M Mar-16

Revenue 8,037 7,344 3,763 7,982
EBITDA 733 366 193 1,371
PAT -114 -910 -729 -884
Networth 2,151 1,110 599 221
Borrowings 8,397 9,586 10,306 9,472
Outcome : Corporate Debt Restructuring.
• Gammon India defaulted in borrowings as early in 2013.
• Ultimately, it had to undergo a major restructuring and would convert debt worth INR 14,800
crs
• As a part of restructuring exercise, GIL carved out 75% of its T&D business to ‘strategic investors’

Remaining 25% Pledged with Lenders

Who is Ajanma Holdings Pvt Ltd ?
Old wine in a new bottle
• Even though company has new strategic investors, they appointed Mr. Digambar Bagde in
January 2017 to run TLL.
• Prior to the transfer of the T&D division to TLL, the Division under Gammon reported a turnover
of over INR 900 crs and loss of INR 200 crs in September 2015. Post the separation, for 18M
Mar 16, the company reported a PAT of INR 9 crs.

TLL (INR crs) 18M Mar 16 FY17 FY18

Revenues 333 1,366 1,886
EBITDA 39 155 207
EBITDAM 12% 11% 11%
PAT 9 51 76
PATM 2.7% 3.7% 4.0%

Miracles do happen !!!

Funding TLL and massive turnaround
Plausible Story
• GIL needed to sell good assets for restructuring.
• Some Investors got a good deal and they invested
• Company did well
• Initial promoters after restructuring wanted an exit and eventually,
they got an exit.
• The only issue : They took the exit a year and a half before IPO at
HALF the valuation but hey.. Mistakes happen..

• All looks fine… Until…

Let’s look deeper at all the transactions & involved entities again
While Digambar Bagde did not have any ownership at the time of the formation of Transrail but
continued as the company’s Managing Director since inception, over the years his holding has
increased and his beneficial holding in the listed Transrail Limited stands at 14%
We have seen the transactions, now let's see
the context
Initial transactions
• AHPL (founded in 2016 only, right before investment) invested and
took 75% for 2.3 crore with conditional 47.7 Crores to be further
invested ?
• Where did that money come from ? Answer : ICDs
• 32 Crores from entities like :
• Anand Agro chem Pvt Ltd
• Container Marine Agencies Pvt Ltd
• Elgan India Maritime Pvt Ltd
A Family Drama….Do you remember?
 Could it be ?
AHPL had defaulted in its repayment obligations to these entities and delay in
days ranged from 1 year to as much as 4 years. Why with TLLs performance ? Are
they ever to be repaid or converted to equity later on for ex–GIL people ?
Next Transactions- Don’t know the trail..BUT
• FY18 : Global Axe Investment Fund (GAIF): 49% for 28 Crore, at 57 Crores Valuation
• FY18: Preference Shares sold at Face Value to Great International Tusker Fund (GITF),
converted into 5.2% Equity in FY23

Whose money came in through these funds? Here’s what the RHP says

The larger picture? TLL (INR crs) 18M Mar 16 FY17 FY18
Revenues 333 1,366 1,886
In context of things, the deal doesn’t make sense.. EBITDA 39 155 207
Why would the promoter AHPL dilute 49% at 57 Crores EBITDAM 12% 11% 11%
valuation. TLL’s PAT was itself INR 51 crs in FY17 PAT 9 51 76
PATM 2.7% 3.7% 4.0%
1x PE ?? Who does that ? – Make a guess. EV to EBITDA
was also at 2.3x
The Re-entry of Mr. Digambar Bagde, as Shareholder
Mr. Bagde, through FPCCL (where his effective shareholding is 47.8%) started
acquiring shares of AHPL.

• FPCCL acquired 4.8% acquired from GAIF at 459 Cr Valuation ( 22 Crore ) in

March 2023
• FPCCL acquired 40% acquired from Promoters at 459 Cr Valuation in
September 2023. Complete Exit to early Promoters

FY 23 Financials TLL : 3100 Crores and PAT of 107 Cr.

Pretty cheap valuation again. Around 4.5x PE and 3.6x EV/EBITDA

Dec 24 listing happened at 23x FY24E earnings and EV/EBITDA of 13.1x FY24E
Yeh Rishta Kya Kehlata Hai?
The Freyssinet Prestressed Concrete
Company Ltd- Promoter of Transrail Designation Appointment Cessation Link
SANJAY HARBANSLAL KAPOOR Director at G and B Contracting Ltd, where Mr.
MD 31-01-2001 Rajan and Mr. Bhansali were directors
YUNUS HANIF SHAIKH Director at Freyssinet India Pvt Ltd, where Mr.
Director 06-06-2022 20-08-2023 Desai was a director
VIJAY MADHUSUDAN DHARAP Director at Freyssinet India Pvt Ltd, where Mr.
Director 12-09-1983 06-06-2022 Desai was a director
Address: 6/B Floor6 SterlingCentreDr Annie Besant Road Mumbai, Maharashtra, India - 400018

FREYSSINET (INDIA) PRIVATE LIMITED Designation Appointment Cessation Link

VIJAY MADHUSUDAN DHARAP Director 14-03-1995 02-04-2019 Director at Freyssinet Prestressed Concrete, which
is a promoter of Transrail
AJIT BALUBHAI DESAI Director 26-03-2002 14-06-2016 CEO/CFO of Gammon India Ltd
Director at Freyssinet Prestressed Concrete, which
YUNUS HANIF SHAIKH Additional Director 01-04-2019 30-09-2019 is a promoter of Transrail
Address: 6 B 6TH FLRSTERLING CENTRE DR ANNIE BESANT RD , MUMBAI, Maharashtra, India - 400018.

G and B Contracting Ltd Designation Appointment Cessation Link

RAJUL ARUN BHANSALI Director 07-10-2003 Exec. Director of Gammon India
SANJAY HARBANSLAL KAPOOR Additional Director 01-11-2022 Director at Freyssinet Prestressed Concrete, which
is a promoter of Transrail
ABHIJIT RAJAN Director 27-12-2002 15-11-2022 CMD of Gammon India Ltd
FPCCL- The Cash Trail
• FPCCL paid INR 22 Crs to GAIF to purchase 4.8% stake in AHPL in
FY23; Funded by unsecured borrowings, details unknown.
• FPCCL paid INR 220crs to Mr. Godha and Mr. Jain for their 50%
stake in September 2023.
• FPCCL undergone shareholding change in FY24 where Digambar
Bagde Ventures LLP (DBVL) had purchased 71.6% stake in the
company.
DBVL Funding ?

• DBVL : Incorporated in July 2023 with

2Cr Contribution but invested 99.4
Crores in FPCCL in FY24 (50% of
FPCCL’s buyout)
• Source of Funding ? 19.5 Crores via
inter-corporate loan and 78cr through
capital contribution by RMH Ventures (
which was also incorporated in same
time period )
And RMH ventures source of money ??
• Inter corporate borrowings taken from Hydra Trading Pvt Ltd
(HTPL) worth Rs.68.9 Crores at 12% interest repayable in 36
months.
• Another 20 Crores : Short-term unsecured debt (details unknown)

• What is HTPL ?
• Vita Jalaj Dani : MD of HTPL
• Jalaj Dani : Director – HTPL
• AND current and former non-executive directors at TLL respectively.
To sum it up…
• Acquisition of good businesses of GIL at throwaway valuations
• Usage of Complex structure to regain ownership directly and
indirectly ( and possibly more in future )
• Losers : Minority Shareholders of Past company and Lenders
Discomforts From the Forensic Lens
Acquiring restructured assets/businesses of Gammon India

1. Deepmala Infra Pvt Ltd (DIPL)

• TLL had given loans to Burberry Infra Pvt Ltd (BIPL) which in turn was used to partly buy
stake in distressed DIPL, erstwhile subsidiary of GIL.
• Deepmala has restructured its loans with banks with the latter likely taking a haircut as
part of the revival plan.
• TLL has loan exposure of INR 79 crs in BIPL, which has not been repaid. In fact all the
loans were either renewed/extended by TLL and flagged by auditor

2. EPC Businesses of Gammon

• TLL and AHPL acquired Gammon Transmission Ltd as a part of restructuring deal in 2017
for a consideration of 5 crs and a promise to invest further INR 10 crs.
• Propose to acquire Gammon Engineering (GECPL), another distressed Civil EPC
business which was carved out as part of CDR. Consideration not known.
MCA Inspection exposed accounting lapses and opacity
related to GIL- linked acquision
Key Observations by MCA
• Failure to assess impairment on related-party receivables (Gammon India
group JVs) — violation of Section 129.
• INR 77 crs bad debts written off (FY17) with no recovery action for two
years.
• No documentary evidence for funding source and valuation certificate for
acquisition by Ajanma Holdings (FY17–FY18).

While the MCA enquiry was settled with a fine, we find it disturbing to note that the company could not provide
documentary proof for the procurement of funds and the valuation certificate of the company. This has a bearing
as SEBI later held the registration of the two FPI promoters as invalid.
Cash Generation remains Abysmal
CFO/EBITDA has averaged to just 48% in the last six years
Particulars (INR crs) FY20 FY21 FY22 FY23 FY24 FY25 Total
Cash from Operations
221 134 86 156 146 415 1,157
Before Tax (A)
EBITDA (B) 277 288 241 345 559 677 2,387
CFO/ EBITDA (A/B) 80% 46% 35% 45% 26% 61% 48%

Cash conversion would have been even lower if we remove effect of acceptances, classified
under trade payables. Adj CFO would be negative

Particulars (INR crs) FY21 FY22 FY23 FY24 FY25

Operating cash flow 85 50 143 35 287
Increase in Acceptances
wrongly classified as Trade 78 105 161 113 351
payable
Adjusted Operating Cash Flow 7 -54 -19 -78 -64
 Is it aggressive revenue recognition?
• Unbilled Revenue has grown faster than revenues for the last two years. Total contract assets
and receivables form 269 days of revenue
• This is much higher and opposite trending to what’s happening with peers
Particulars (INR crs) FY22 FY23 FY24 FY25
Revenue from operations (ex-other op.rev) 2,350 3,152 4,077 5,212
Growth 34.1% 29.3% 27.9%
Sundry debtors 640 645 1,026 1,317
Growth 0.8% 59.1% 28.4%
Contract assets 1,094 1,467 1,951 2,522
Growth 34.0% 33.0% 29.3%

Days outstanding. Contract assets 170 170 175 177

Days outstanding Contract assets +
269 245 267 269
receivables

Contract assets+ Receivable FY-22 FY-23 FY-24 FY-25

KEC 234 266 208 204
KPIL 179 190 168 128
Patel Engineering 117 77 69 NA
Skipper 91 66 84 NA
 Joint Operations with distressed Cos
• Partnerships with financially weak companies expose the firm to project defaults,
recoverability issues, and profit erosion.
• Potential Impact: Default could trigger INR 140 crs provisioning (26% of PBT)
• The company has in the past also granted loans & advances to its joint operations on which it
has made provisions (highlighted in orange)

JV Exposure
Jyoti Structures Ltd- Substantial debt and Guarantees- INR 46.3 crs
undergoing restructuring. Lenders took
sig. haircut
Gammon Engineers (GECPL)- Under RBI- Receivables- INR 110 crs,
led restructuring; unable to meet Guarantees- INR 33 crs
obligations.
Altis Holding Corp- Under probe for Receivables- INR 22 crs,
structural collapse on Delhi–Mumbai Guarantees- INR 20.7 crs
Expressway.
 Overseas Business Risk
• Operations in Bangladesh, Mali, and Bangladesh Order – Major Concentration
Niger — all countries with recent • USD 525 mn (~₹4,300 cr) river-crossing project = ~20% of
history of political unrest. FY24 revenue
• Combined exposure: ~29% of revenue
• Receivables from Bangladesh: ₹300–400 cr, excluding
• Bangladesh: 19.3%
large contract assets (177 days outstanding)
• Mali: 8.4%
• Niger: 1.5% • Total project exposure: INR1,000 crs

• Overseas subsidiaries make losses; 3.1% • Project reportedly on track and payments regular, but high
of PAT in FY25 dependence on single foreign client.

Net Profits (INR mn) FY22 FY23 FY24 FY25

Transrail International FZE -1 -3 -1 -2
Transrail Structures America INC -0 -0 -0 -2
Transrail Lighting Malaysia SDN BHD -0 -0 -0 -0
Transrail Nigeria 1 -3 -6 -6
Transrail Contracting LLC - - - -1
Total 0.3 -5.7 -7.1 -10.2
Few more concerns
• Regular delay in depositing statutory dues
• Deviation in WC between books and those furnished to the banks
• Title of most Immovable properties not held with the company
Thank You!