Railway Stocks: As the Union Budget 2026 approaches, railway-related shares have again come on the radar of investors. The reason is not just pre-budget positioning, but also an important step taken towards reforming the finances of Railways.
Indian Railways increased the fares on 26 December 2025. This is now being considered as a step towards revenue discipline. Investors hope that this will improve the internal cash flows of the Railways and reduce budget pressure on the system in the long run.
There are also big expectations from Budget 2026 regarding safety upgrades, modernization and capacity expansion. This includes projects like Kavach, new Vande Bharat sleeper trains and Dedicated Freight Corridors. For this reason many companies related to railways are in focus.
Government company Indian Railway Finance Corporation i.e. IRFC is the financing arm of Railways. Its function is to fund rolling stock and infrastructure assets through long-term leases. Its business model is considered simple, stable and low risk.
The company’s net interest margin increased to 1.55% in Q2 FY26. This is because of loans given to power, renewable and other government infrastructure entities outside the Railways, where spreads are higher. Despite this, the risk is limited, as more than 98% of the assets are still linked to railways and government institutions. Due to extremely low operating costs, margins remain safe even as the balance sheet grows.
Shares of IRFC closed at Rs 121.27, down 2.41% on Friday. The stock is up 7.04% in the last 1 month. It has given a negative return of 5.58% in 1 year. However, in the last 5 years it has given multibagger returns of 388.99%.
Public sector Rail Vikas Nigam Limited i.e. RVNL is the execution company of railway and transport infrastructure projects. Its work extends to civil works, electrification, signaling and metro rail.
Performance improved after a weak start due to monsoon in Q2 FY26, but margins remained under pressure. The reason for this is that now more projects of the company are coming through competitive bidding, in which the margins are less.
Margins are expected to improve as projects are completed and scope-change claims are settled. The order book gives good visibility over the next few years. The company’s capex is low and most of the funding will come from internal cash flow.
Shares of RVNL closed around Rs 333 on Friday, down nearly 3%. The stock has risen about 6% in the last 1 month. At the same time, RVNL has given negative returns of 6.83% in the last 1 year. In the last 5 years, RVNL has given multibagger returns of 957.05% to investors.
IRCTC is the most important part of the non-fare revenue model of Railways. It handles internet ticketing, catering, packaged drinking water and tourism services. Its business model is largely asset-light. The company’s revenue grew by 7.7% in Q2 FY26 and EBITDA margin stood at 35.3%.
This improvement came not from increasing prices, but from better cost control, increasing share of digital ticketing and non-convenience fee income. Internet ticketing remains the most profitable segment. The tourism business saw a good turnaround at the EBITDA level, while catering margins remained stable.
Further, the company is working on strengthening the digital platform, unified travel portal, payment aggregation and increasing Rail Neer capacity. All these investments will be from internal accruals.
IRCTC shares closed at Rs 640.95 on Friday, down 2.36%. It has come down 14.18% in 1 year. At the same time, it has given a return of 122.37% in 5 years.
RITES is a transport infrastructure consultancy company, working in railways, highways, ports and urban infrastructure. A major part of its income comes from consultancy and project management.
Revenue grew 1.5% in Q2 FY26, while EBITDA margin expanded to 24.4%. This was due to better contribution from consultancy and export segments, which compensated for the weakness in the turnkey business.
Further improvement in turnkey revenues is expected in late FY26 and FY27. Consultancy and exports will remain margin drivers. The company’s capex is low and its funding requirement will be met through internal accruals. Currently the stock is trading at P/E of 28.
RITES shares closed at Rs 232.29 on Friday, down 1.83%. The stock is up 2.83% in 1 month. At the same time, it has given a negative return of 16.52% in 1 year.
Texmaco Rail & Engineering
Private sector railway company Texmaco Rail & Engineering deals in freight wagons, rail infrastructure, electrical systems and castings. The company gets direct benefits from the freight, electrification and safety expenses of the railways.
Performance in Q2 FY26 was more affected by supply-side issues than demand. Revenue declined 6.5% due to shortage of wagon wheelsets and weak foundry exports. However, EBITDA margin stood at 10.5%, which is slightly better than the previous quarter.
Going forward the company will focus on order book execution and business mix improvement. Future capex will be on foundry expansion and technology upgrades, which will be funded mostly from internal accruals. Currently the stock is trading at P/E of 25.
The stock of Texmaco Rail also closed in the red on Friday at Rs 127. The stock has fallen 22.56% in the last 6 months. At the same time, it has given a negative return of 26.11% in 1 year. However, it has given multibagger returns of 309.55% in 5 years.
Should we bet on railway companies?
According to market experts, all the shares in the railway sector are no longer cheap. Nifty Railways PSU Index is trading at a P/E of around 26, but the valuation difference between companies is quite large.
Top-down bets can be risky in such an environment. What is now needed is a bottom-up approach, where companies with strong track records, balanced balance sheets and reasonable valuations are selected.
Harshal Dasani, Business Head, INVAsset PMS, said that railway shares should not be seen as a bet on the entire sector, but as a selective opportunity.
“The current valuations of many stocks already reflect high expectations,” he said. In such a situation, stock selection becomes most important, because the rise based only on sentiment does not last long.
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