Titagarh Wagons is expecting a turnaround in its loss making European subsidiaries by 2020-21.

The city-based wagon maker has two subsidiaries — Titagarh Firema SpA in Italy and Titagarh Wagons AFR in France. The Italian subsidiary had reported an operating profit of Rs 33.22 crore in 2017-18, lower than Rs 86.85 crore in 2016-17.

After the operating profit, the Italian subsidiary had to write off losses on account of revisions in long-term contracts and possible penalties from delay in the supply of trains that led to losses of Rs 80.23 crore in 2017-18.

The French subsidiary had reported a loss before tax of Rs 44.05 crore for 2017-18 against a loss of Rs 1.17 crore in the previous year.

“While TFA (Italy) saw impact of issues mainly arising out of legacy contracts and resultant extraordinary losses, TWA (France) had some technical problems with the bogies and a couple of onerous contracts which adversely impacted the operations during the year,” the company said in its annual report.

“When we had acquired the Italian company, we had a portfolio of both good and bad contracts. We have been executing them. The challenge now is to build the order book. We have participated in some tenders and we are expecting some good contracts. By March 2021, the company should have a stronger balance sheet,” said Umesh Chowdhary, vice-chairman and managing director of Titagarh Wagons.

“The offshoot benefit of the acquisition, however, has been enormous,” said Chowdhary adding that with the technology enabled the company to qualify for metro tenders and other development orders in India.

On the French subsidiary, Chowdhary said, “There were some strategic contracts which were signed in the sense that we wanted to get into stainless steel wagons and we signed the contract at a low price. We realised later on the cost was higher than what we expected.”

The company has executed the order and booked the losses. It expects to turn around the operations of the subsidiary from 2019-20 onwards.

Management rejig

Titagarh has recast the management of both the companies and Chowdhary said, the performance of the two will improve on a standalone basis on the back of steadily improving demand in the railway business in Europe. “Both the companies in the next two years will turn profitable and they will be contributing well to the overall results of the company.”

The company’s domestic business has also received a shot in the arm after having secured a Rs 1,560-crore order for wagons from Indian Railways.