RVNL Secures Rs 3,622 Cr Contract from BSNL for BharatNet Network Development

Rail Vikas Nigam Ltd (RVNL), a government-owned company, has recently been awarded an important contract by Bharat Sanchar Nigam Ltd (BSNL) for the development, upgradation, and maintenance of the BharatNet middle-mile network. This contract is a significant step for RVNL, as it will play a key role in improving India's digital infrastructure.

The contract, valued at Rs 3,622.14 crore, will follow a Design-Build-Operate-Maintain (DBOM) model. This means RVNL and its partners, HFCL and ATS, will be responsible for building, upgrading, and maintaining the middle-mile network for BharatNet. RVNL will be the lead member in the partnership.

The project is divided into two main parts: a three-year construction phase and a 10-year maintenance phase. During the maintenance phase, RVNL will handle the network's upkeep in two five-year intervals. The company will receive payments based on 5.5% of the capital expenditure for the first five years and 6.5% for the next five years.

This project will help expand and improve the BharatNet network, which is an important part of India's digital development plan. RVNL’s role in this project is part of its regular business activities, and it will be crucial in connecting more people to high-speed internet.

However, RVNL has faced some financial challenges. In the second quarter of FY25, the company reported a 27% drop in its net profit, which fell from Rs 394.3 crore in Q2 FY24 to Rs 286.9 crore. The decline was due to lower operating margins and reduced earnings. The company’s revenue from operations also dipped by 1.2%, dropping from Rs 4,914.3 crore to Rs 4,855 crore. Additionally, RVNL’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fell by 9%, highlighting increased operational pressures.

Despite these challenges, RVNL’s stock performance has been closely watched. The company’s average target price is set at Rs 357, which suggests a potential 4% decline from its current price. As of Wednesday, RVNL shares closed at Rs 371.9, down 1.3% on the Bombay Stock Exchange (BSE). Over the past six months, the stock has fallen by 41%, although it has seen a remarkable 367% increase over the last two years. Currently, RVNL's market capitalization is Rs 77,541 crore.

In summary, RVNL's new contract with BSNL is a significant achievement, although the company is facing some financial struggles. The project’s success will play a key role in enhancing India’s digital connectivity, and RVNL’s stock performance will be interesting to watch in the coming months.

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