Top 5 Rail Stocks that Could be a Hot Investment

livemint.com:

railway stockshave been on the radar of investors. And for good reason. The government is planning to introduce aproduction-linked incentive (PLI) scheme for train component makersas part of its efforts to attract foreign manufacturing firms and reduce dependence on import.

The PLI scheme being considered for the railways is in line with the government's plan of having only two types of passenger coaches in Indian Railways -- Linke Hofmann Busch (LHB) and Vande Bharat -- down from 28 at present. India continues to import critical components of rolling stock such as wheels and axles despite sustained demand from the railways. To cut some of this import dependence, the railways recently awarded a procurement order for 1.54 million forged wheels that are manufactured in the country.

Besides this, the government is also looking to revamp the existing infrastructure. Earlier this month, Prime Minister Narendra Modi laid the foundation stone for the redevelopment of 508 railway stations across the country. With so many developments and long-term tailwinds, the sector has the potential to deliver handsome returns to investors.

Here are five stocks that could be a hot investment. First on our list isIRFC. The company is the financing arm of the Indian Railways.

It is a Government of India Enterprise, under the Ministry of Railways (MoR). IRFC's principal business is to borrow funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways. On the back of rising disbursements, IRFC's revenue has grown at a CAGR of 21% YoY in the last five years while its net profit has grown at a CAGR of 25% YoY.