Is the RVNL surge overdone?

Shares of Rail Vikas Nigam Ltd (RVNL) have climbed more than 4% over the past three trading sessions to ₹360, spurred by the second revision in railway passenger fares since July, which took effect on 26 December.

- Manish Joshi

Two fare hikes within a year signal a clear intent by the government to strengthen Indian Railways’ finances, potentially creating headroom for higher capital expenditure (capex) over time. While such policy moves are sentimentally positive, the stock’s reaction appears out of proportion to the expected incremental financial impact on the revenues of railways. RVNL’s market capitalization has expanded by ₹3,600 crore in just three days. For perspective, the annual revenue gain for the Railways from the two fare hikes is estimated at ₹4,000 crore.