CEBBCo eyes railway orders, plans IPO

Jabalpur, Madhya Pradesh-based Commercial Engineers and Body Builders (CEBBCo) plans to tap the capital market to establish a new facility to make wagons and EMU coaches for the Indian Railways. CEBBCo, which is a supplier of products for the commercial vehicle sector, is eyeing business from the railways and the new facility is being set up at an estimated cost of Rs 130 crore.

CEBBCo’s plans to foray into the railway business is part of a strategy to de-risk the business model which has been largely focused on the CV sector and to mitigate the risks of cyclicality inherent in the sector. The company also aims to tap the growth potential from the railways. The 2010-11 Union railway Budget has laid out plans for the acquisition of 18,000 wagons throughout FY 2011.

This is in line with the target set out in the Eleventh Five Year Plan (2007-2012), which mentions that the addition in wagons will increase to an estimated 60,000, a 79 percent increase on the additions during the Tenth Five-Year plan (2002-2007) period. CEBBCo’s new unit which will cater to the railways exclusively will come up in October and will have a planned capacity of 1200 wagons and 150 EMUs. The company has already placed bids to supply 10,739 wagons for the railways.

Major outlay In its draft red herring prospectus, CEBBCo says that the railways has made a major outlay for wagon refurbishment which includes upgradation and refurbishment of 16,580 wagons. CEBBCo, which first supplied to the railways in late 2008, plans to utilise its expertise in commercial vehicle body building, and the synergies that business offers to build railway wagons. Even as it prepares to take a leap into the railways business, CEBBCo is also expanding its product portfolio for its commercial vehicle clients. Its main customers are Tata Motors, Ashok Leyland Asia MotorWorks, MAN-Force and Hino.

New CV products CEBBCo has recently designed a stainless steel tipper, which incidentally, is a first of its kind in India. The company claims these tippers are significantly lighter than mild steel tippers, and have a larger payload as well as stronger resistance to abrasion. The stainless steel tipper is around 600 kilograms lighter than a mild steel tipper and does not require any painting, according to CEBBCo.

Meanwhile, to expand its portfolio for commercial vehicle makers, CEBBCo has recently set up its first refrigerated container plant. This new plant is based on European ATP standards. It claims that refer box is 0.4 to 0.7 tonnes lighter than others, and is made of mild steel. Glass-reinforced plastic and PU foam have helped reduce the weight of the boxes and since they are not good conductors of heat, the cooling is better and the use of airconditioning is a lot less, leading to improved fuel efficiency.

At present, CEBBCo has five plants – four located in Madhya Pradesh and one in Jharkhand. n