₹1.3 Trillion Capex: 6 Railway stocks that may benefit from Govt’s capex plan for railway safety

Synopsis: India is on the verge of a record rail safety campaign. Expenditure is expected to exceed Rs 1.3 trillion in FY27. A focus on tech-driven safety, such as the use of Kavach, may keep signalling and rail safety stocks in focus.

Railway safety has become a key focus in India’s infrastructure plans. Following several train accidents and growing public concern, the government is considering its largest allocation ever for rail safety and accident prevention.

According to sources, spending on safety-related projects could exceed Rs 1.3 trillion in FY27 (12 percent higher than the current budget), making it one of the largest-ever allocations for the sector. If this happens, it will represent a significant change in how Indian Railways manages its capital spending.

This proposed increase is not just a routine budget change. It shows a clear decision to shift from reactive repairs to technology-driven prevention. This shift aims to ensure safety systems can grow alongside increasing rail traffic and faster train operations.

What Is Driving the Surge in Safety Spending

In the last decade, Indian Railways has significantly lowered accident rates per million train kilometres. However, recent serious incidents, including collisions due to signal overshooting, have brought safety back into sharp focus. These events have revealed the limitations of manual controls and the urgent need for automated systems.

Indian Railways reported 31 accidents in FY25 so far. Out of those, 10 were serious, i.e, collisions, fires, derailments, the kind that end up costing lives or damaging property. Looking back, from FY15 to FY24, there were 678 of these major accidents, and 748 people died. Numbers like that make it pretty clear that even with some progress, safety is still a big issue.

However, the official data also reveals a substantial improvement in operational safety. The number of accidents per million train kilometres has decreased from 0.11 in FY15 to 0.03 in FY24, which is a 73 percent improvement. The government has therefore extended the Rashtriya Rail Sanraksha Kosh (RRSK) to keep and raise this level of safety, under which more than Rs 1.08 trillion has already been spent on the modernisation of the most important railway assets.

Policymakers are now calling for a fundamental change in rail safety, emphasising technology, predictive maintenance, and automation. This push explains why safety spending rose from Rs 87,327 crore in FY23 to Rs 1.01 trillion in FY24, and then to Rs 1.14 trillion in FY25. For FY26, the budget is about Rs 1.16 trillion, but the proposed outlay of over Rs 1.3 trillion for FY27 would represent a significant acceleration instead of just gradual growth.

If approved, safety-related projects could make up nearly half of total railway capital spending. Overall capital expenditure is projected to reach around Rs 2.76 trillion in FY27, up from Rs 2.52 trillion this year.

Where the Money Is Likely to Be Spent

Most of the extra safety spending will likely go to three main areas. The first is track renewal and core infrastructure maintenance, which helps reduce derailments and failures due to wear. The second area is rolling stock upkeep, ensuring trains remain dependable as usage increases across the network. The third, and most crucial, area is the rapid expansion of Kavach, India’s homegrown automatic train protection system.

Kavach is designed to automatically apply brakes if a loco pilot does not respond to signals, greatly lowering the risk of collisions. While the system has already been implemented on about 1,465 route kilometres, this is still a small part of India’s total rail network (2 percent). The rollout of Kavach 4.0, which will cover over 15,500 route kilometres, marks the beginning of large-scale nationwide deployment.

Even after this expansion, Kavach’s coverage will still be limited compared to the entire network, suggesting that safety-related orders, upgrades, and maintenance will remain visible over several years.

Which stocks might benefit from it

The renewed focus on rail safety has highlighted companies involved in signalling, train protection systems, and safety electronics. Domestic firms like HBL Engineering and Kernex Microsystems are linked to Kavach and railway signalling infrastructure. HBL Engineering has a total order book of nearly Rs 4,000 crore, and Kernex Microsystems has a total order book of Rs 2,124 crore.

As a result of the increased use of trains on the rail tracks, the demand for safer and modern rolling stocks and long-term maintenance is also going up. Listed companies like Titagarh Rail Systems and Siemens India will become the beneficiaries of these developments in the areas of train manufacturing, system upgrades, and maintenance contracts. On the other hand, BEML may have some indirect advantages if there is a higher need for rolling stock and its maintenance.

The main support for all this is the signalling and communication backbone, where RailTel is playing a key role through its fibre network, signalling, and interlocking systems, while RITES is getting the benefit of engineering design and project management work related to these upgrades.

These companies operate in a specialised area with high entry barriers, lengthy qualification processes, and strict regulations. Unlike general EPC contractors, providers of signalling and safety solutions gain from repeat orders, system upgrades, and long-term maintenance contracts once technology becomes standardised across the network.

Why This Trend Could Have Long-Term Market Impact

What makes this safety initiative particularly significant for investors is its permanence. Safety investments are rarely reversed once they gain public and political attention. Systems like Kavach require ongoing expansion, integration with new technologies, and regular updates, leading to consistent revenue opportunities.

More importantly, as train speeds rise and traffic density increases, the tolerance for human error sharply decreases. This reality makes automated safety systems necessary and unavoidable.

The government’s approach seems clear: ensure that safety infrastructure grows in anticipation of rising traffic, rather than after accidents happen. If the proposed allocation is realised, FY27 could be the turning point where rail safety shifts from being a compliance expense to a long-term investment strategy, keeping certain railway stocks in the spotlight for investors.

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