The railways are among the most profitable segments in the country.
The government’s plan to develop a chain of ‘smart-chain’ companies will help the railways become more efficient.
The railways are currently in the process of acquiring about 40,000 shares in private companies, which will help them make investments in railways infrastructure.
This is in line with the government’s target to increase investments in rail infrastructure by up to 10% in the next 10 years.
However, the railways are facing some challenges.
In the past few years, a number of private companies have been bought out and the stock value has been dropping.
These companies have not been able to meet the financial obligations due to the high cost of acquiring shares.
In recent months, there have been reports that the railways is considering making investments in smart-chain companies, but no decision has been taken yet.
The railways has started working on a new initiative called ‘Smart-Chain Aquisitions’ in which the railways will acquire shares in companies that have been acquired by private companies.
What is a ‘Smart Chain’?
The railways will be allowed to acquire shares from private companies through a ‘special purpose vehicle’ (SPV).
In a SPV, a company can be set up by a private company and it will be given the right to acquire additional shares.
This will help it meet the expenses associated with the acquisition.
For example, in the case of Tata Power and its stake in SBI, the Tata Power SPV would give the railways the right of acquiring 20,000 shareholding shares.
In other cases, it can grant a limited amount of shares.
If a company wants to acquire more shares, it will have to pay a commission to the railways for each share that it acquires.
The railways, however, are not allowed to buy shares directly from the private companies involved in the transaction.
Instead, the rail companies will have the right from the start to buy the shares directly, under the right circumstances.
According to a Railway Board official, the government is looking to use this strategy to develop smart-chains and increase the number of railways to the point where they can meet the railways’ future demand for railway infrastructure.