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Indian Railways is undergoing a major transformation. With an allocation of ₹3.02 lakh crore in the Union Budget 2025, a 20% increase from the previous year, the government is focusing on adding high-speed trains, building private freight terminals and private container train operations, and redevelopment of stations. Not only that, but railway traffic alone is expected to generate ₹2.7 lakh crore in revenue for the current financial year.
On the investment front, railway infrastructure is projected to attract total investments worth ₹50 lakh crore. With railways holding so much potential for investors, now is the time to look beyond the big names in this sector, including Indian Railway Catering and Tourism Corporation (IRCTC).
Three Railway Stocks Worth Tracking
For investors looking for diversification in stocks related to Indian railways, keep an eye on the following:
#1 Kernex Microsystems India Limited
Not widely known, Kernex Microsystems manufactures and sells safety and software systems to the railway industry. Its product lineup includes the following:
- LxGuard: It is used to automate gate operations and provide warning signals at railway crossings.
- SAFELx: It activates visual and audio alerts when a train approaches a crossing.
- KMDAX: It is a multi-section digital axle counting system that detects train presence and track occupancy.
- KTPIS: It is a train passenger information system that provides real-time updates.
- ATRW: It is an automatic timing (recording) device that logs wagon movement data.
- Casry: It is a collision avoidance system used in yards and terminals, and helps with train movements in depots and freight terminals.
- TrainSHIELD: It is a collision prevention system that uses GPS, radio communication, and onboard sensors.
Recently, the Kernex Microsystem consortium secured a Letter of Acceptance (LoA) from the Dedicated Freight Corridor Corporation of India (DFCCI), New Delhi, worth ₹209.8 crores for the end-to-end implementation of Kavach and tower setup in the Eastern Dedicated Freight Corridor. West Central Railways also granted an order worth ₹151 crores for the provisioning of Kavach on the Ultra High Frequency (UHF) backbone with Optical Fibre Cable (OFC) in the Bhopal division.
A few months back, the company received a Kavach contract worth ₹21 crore from South Central Railway. As per the agreement, the company will work on the safety system for the Bidar–Parli Vaijnath section. It has also bagged a ₹311 crore order from Southern Railways to implement a train collision avoidance system in different sections of the Chennai division. Western Railway has also signed a pact worth ₹182 crore for Kavach Version 4.0 on the Palanpur–Samakhiali–Gandhidham section of the Ahmedabad division.
Kernex Microsystems’ client list also includes Research Designs and Standards Organisation (RDSO) and Electronics Corporation of India (ECIL). To cater to its diverse customer needs, the company has partnerships with global companies like Nexcom International, ALTPRO, and Trimble.
Talking about the financials, in the first quarter of the financial year, 1QFY26, the company reported a revenue of ₹55.93 crores, marking a 64.4% increase on a year-on-year basis. The net profit for the period stood at ₹7.4 crores.
Kernex Microsystems India Limited 5-Year Financial Performance
| Particulars | FY21 | FY22 | FY23 | FY24 | FY25 |
| Sales (₹ in crores) | 18 | 7 | 4 | 20 | 190 |
| Operating Profit (₹ in crores) | 4 | (9) | (17) | (20) | 41 |
| Net Profit (₹ in crores) | 2 | (17) | (20) | (27) | 50 |
| EPS (₹) | 1.6 | (13.8) | (12.8) | (15.8) | 29.9 |
Source: Screener.in
There were several reasons behind the average financial performance before FY25. The company faced delays in railway safety project approvals, especially for large-scale deployments like TCAS (Train Collision Avoidance System), which stalled revenue realisation. Also, although the company has embedded R&D and manufacturing capabilities, it failed to utilise its assets, which increased its operating expenses fully.
Talking about the positives, Kernex’s share price surged by 37% over 52 weeks, while five-year returns stood at over 5,000%. The stock is trading at a high P/E ratio of 33.4x. The company has also improved its working capital requirements to 146 days from the previous 789 days.
The reason for putting this stock on the list is the growing adoption of Kavach technology and the government’s increased budget allocation for safety technology across different railway zones post-FY24.
#2 Hind Rectifiers Limited
Hind Rectifiers has a diversified business. The company looks after end-to-end production and marketing of not only railway transportation equipment but also power electronic equipment and power semiconductors. For railways, its product lineup includes traction and auxiliary transformers, auxiliary converters and battery chargers, IGBT propulsion systems, traction motors, brake systems, rolling stock HVAC systems, and more.
In June 2025 alone, the company bagged two orders from Indian Railways worth ₹101 crores and ₹127 crores for the supply of electrical components. To expand its business, the company also incorporated Coincade Studios, a wholly owned subsidiary that develops products and solutions for artificial intelligence, information technology, Web3, and other software segments.
In FY25, the company invested heavily in its Satpur and Sinnar plants to enhance its in-house capabilities. Hind Rectifiers has 20 products related to the railway and industrial segments in its development lineup. Beyond Indian Railways, other notable clients with whom the company has long-standing relationships include National Thermal Power Corporation (NTPC), National Fertilisers Limited (NFL), Steel Authority of India Limited (SAIL), Oil and Natural Gas Corporation (ONGC), Gas Authority of India Limited (GAIL), and Indian Farmers Fertiliser Cooperative Limited (IFFCO).
Regarding financials, in the June quarter of FY26, the company reported revenue of ₹215 crore, representing a 58% increase year-over-year. The net profit surged to ₹13 crore from ₹7 crore in the same quarter of the previous financial year.
Hind Rectifiers Limited 5-Year Financial Performance
| Particulars | FY21 | FY22 | FY23 | FY24 | FY25 |
| Sales (₹ in crores) | 305 | 372 | 359 | 518 | 655 |
| Operating Profit (₹ in crores) | 20 | 23 | 15 | 45 | 71 |
| Net Profit (₹ in crores) | 5 | 8 | (6) | 13 | 37 |
| EPS (₹) | 3.2 | 4.7 | (3.7) | 7.3 | 29.9 |
Source: Screener.in
Hind Rectifiers stands to benefit from industry tailwinds, including increased railway electrification and infrastructure spending. The company also maintains a decent order book. Over the span of 52 weeks, the stock delivered a 68.5% return, while over five years, the return exceeded 1,000%.
However, what investors must not overlook is that at present the stock is trading at a high P/E ratio of 62.4x, suggesting a premium valuation and limited margin for error. Liquidity remains moderate, and its debt-to-equity ratio of 1, though not uncomfortably high, signals potential leverage concerns if cash flows tighten.
#3 HBL Engineering Limited
HBL Engineering Ltd, formerly known as HBL Power Ltd, specialises in the design, development, and manufacturing of electronic solutions and batteries.
Its product lineup includes modular LFP batteries, residential energy storage systems, industrial and commercial energy storage systems, grid-scale energy storage systems, a specialised battery division, a battery management system, and the production of Nickel-Manganese-Cobalt batteries.
HBL Engineering holds the second position globally in industrial nickel batteries. Its batteries and energy storage systems are used in defence, aviation, telecom, oil and gas, e-mobility, and renewable energy sectors.
The company’s electronics division offers two products specifically designed for railways: TCAS (Train Collision Avoidance System) and TMS (Train Management System).
HBL Engineering started FY26 with five letters of acceptance (LOA) for orders worth ₹762 crores from Central Railways. The project requires the implementation of the Kavach train protection system. The project will cover 3,900 kilometres stretched across 413 railway stations.
In May 2025, HBL bagged orders worth ₹101.5 crores from IRCON International for Kavach provision in the South Western Railway division, covering 778 kilometres across 85 stations and two locomotives.
Recently, Western Central Railways accepted HBL’s LOA worth ₹54 crores for the end-to-end designing to commissioning of Kavach equipment in the Kota division. Following this deal, the company’s order book stood at ₹4,083 crores.
Turning to the financials, in the June quarter of FY26, HBL Engineering posted a revenue of ₹602 crores, up from ₹520 crores in the same quarter of the previous financial year. The total expenditure remained constant on a YoY basis. However, net profit recorded a significant jump of 56.5% to ₹143 crores on a YoY basis.
HBL Engineering Limited 5-Year Financial Performance
| Particulars | FY21 | FY22 | FY23 | FY24 | FY25 |
| Sales (₹ in crores) | 912 | 1,236 | 1,369 | 2,233 | 1,967 |
| Operating Profit (₹ in crores) | 67 | 139 | 151 | 423 | 392 |
| Net Profit (₹ in crores) | 14 | 94 | 98 | 280 | 276 |
| EPS (₹) | 0.5 | 3.4 | 3.6 | 10.1 | 9.9 |
Source: Screener.in
HBL Engineering stocks delivered 36.1% returns in a year and around 5,000% returns in the last five years. However, on the other hand, the stock is slightly overvalued, trading at 16 times its book value. It also has a high P/E ratio of 69x.
The core strength of HBL Engineering lies in its ability to own and develop proprietary technology, rather than relying on foreign licenses. The company is also focused on investing in electronic fuses, charging hubs, and IT systems infrastructure, which is funded through internal accruals.
The growing demand for its products from the industrial battery and electronic segments in railways and defence has placed the company in a position to reap benefits. However, it will be interesting to see how the company manages the volatility in raw material prices and working capital requirements while maintaining a healthy liquidity position.
Takeaway for Investors
Investors looking for opportunities in the railway sector should adopt a balanced approach. With the government’s strong push for modernisation, companies like Kernex Microsystems, Hind Rectifiers, and HBL Engineering are benefiting from rising demand for railway safety, electrification, and technology systems. Though you cannot deny the growth potential, what you also cannot overlook is that the valuations for some of these stocks appear to be stretched, and there is slight room for error in execution.
Investors must also avoid chasing short-term rallies and should focus on long-term prospects, order book strength, and financial stability before committing. When investing in any of the above railway ancillary stocks or other related small-cap companies, diversification across multiple players is recommended to lower risks related to project delays, fluctuations in raw material prices, or debt concerns.
Disclaimer
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Rishabh Sinha is a seasoned financial content creator with over 10 years of experience in BFSI domain. His portfolio spans over 20 of India’s most trusted financial brands. Rishabh brings depth, structure, and a reader-first approach to every piece he crafts.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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