A big change can be seen in India’s railway sector. The government is preparing to merge two big government companies Rail Vikas Nigam Limited and IRCON International. The aim of this step is to create a strong infrastructure player, which can easily handle big projects not only in the country but also abroad. As soon as the news of the merger came out, there was a rise in the stocks of both the companies in the stock market. IRCON shares closed nearly 2.9% higher at ₹119, while RVNL gained 3.3% to ₹258. It is clear that investors have high expectations from this merger.
Why is this merger happening?
Till now RVNL and IRCON have been competing with each other in many projects. But after the merger, this competition will end and the strengths of both the companies will come together. This will enable better utilization of manpower, technical capacity and financial resources. Also, the new company will be able to easily bid for large and complex projects.
Order book worth more than Rs 1.5 lakh crore
The order book of the company formed after the merger may exceed Rs 1.5 lakh crore. This will make it among the major infrastructure players in the country. At present, both RVNL and IRCON are playing important roles in railway and infrastructure projects.
Big companies will get competition
Experts believe that after the merger, the new entity will be able to give tough competition to big private and government players. This company can register its strong presence at the international level also.
Merger will take time
However, this merger will not be implemented immediately. For this, the approval of many departments and finally the approval of the cabinet will be required. The Railway Ministry will prepare its detailed plan in the coming time.
What is the signal for investors?
If this merger is successful, both the size and capability of the new company will increase. This could create a possibility of the value of the share increasing in the long run, which could be beneficial for investors.