Indian Railways Changes Its Playbook For Coaches

TITLE: The Indian Railways changes its playbook for its coaches | The Daily Brief #451 CHANNEL: Markets by Zerodha DATE: 2026-04-23 ---TRANSCRIPT--- In today’s episode, we’ll break down two important stories. First, we’ll talk about India’s railway blues turning color and then we’ll talk about how drones are changing the economics of modern warfare. Welcome back to the daily brief by Zeroda where we cut through the noise to help you understand what’s actually happening in the most important stories from business and markets. I’m your host Axara and today is Thursday 23rd April. Coming to the first story. So at markets we’ve been looking at the many moving parts behind India’s rail infrastructure from electrification to kavach. Today we’re looking at the most visible part of a train that a passenger can see feel and board the iconic bluebodied mild steel coach. So for over six decades India’s passenger trains ran on the same basic idea. a powerful locomotive up front pulling a long string of passive coaches behind it. As of March 2018, 49,033 conventional coaches were still in service. Since 1955, the Integral Coach Factory or ICF in Chennai and its sister factories have built over 75,000 coaches of all types. For most of that history, the dominant design was the conventional ICF coach. But in January 2018, the ICF flagged off its last one. and what replaced them and why is a story that goes beyond a simple paint upgrade. Let’s dive in. Now, the original ICF coach was designed in the 1950s with technology from a Swiss company. It was made of mild steel which made it heavy and prone to rusting quicker. These coaches had a maximum permissible speed of 110 km/h and like all conventional trains, they were locomotive hauled which means one engine at the front did all the pulling. But beyond speed, coaches also have to primarily account for safety. See, in the old ICF coaches, the connection between any two coaches had two separate parts. The first mechanism, called a screw coupling, held coaches together when the locomotive pulled them forward. The second mechanism, called side buffers, absorbed the shock impact when coaches pushed into each other, like during braking. But since these were two separate systems with gaps between them, coaches actually had room to move too loosely against each other, which also meant that if the train stopped suddenly, say in a collision, coaches could disconnect, slam into each other and climb on top of one another. This is what kept happening through a series of bad derailments in 2015 16 and it forced Indian railways to act. Now in 1998 the rail coach factory in Kapoor Tala received a technology transfer from a German company called Linka Hoffman Bouch or LHB. The coaches built using this design are known as LHB coaches and manufacturing at Kapoor Tala began in 2001. LHB coaches first appeared on premium services like Rajdani and Shatabi before gradually spreading across the network. So the LHP coaches are made of stainless steel instead of mild steel. They’re lighter, stronger, and don’t rust as easily. And they even last longer. An LHP coach is designed to stay in service for 35 years versus 25 for ICF coaches. They use disc brakes instead of the older tread brakes, which means shorter stopping distances, and they also sound quieter. But the most important change was of course in how the coaches are joined together. So instead of the old system where pulling and pushing forces went through different mechanisms with slack in between, LHP coaches use a single heavyduty coupler at the center of each coach that handles both. It locks tight and it’s designed so that in a crash the coaches stay in line instead of climbing over each other. Now this made a noticeable difference in reality. For instance, in 2014, the Deepar Rajdani derailed at high speed, but there was no loss of life. A CAG audit of the accident explicitly noted that none of the LHP coaches flipped over and there was no loss of life. After the derailment spree of 201617, Indian railways pushed hard to replace the older coaches with LHP stock. But this upgrade didn’t come cheap. According to parliamentary replies, each LHP coach cost rupees 75 lakh to rupees 1 cr more than the ICF equivalent. But the longer lifespan partially offset that premium. By 2024, the ministry said about 23,000 conventional coaches had been replaced by LHP since 2015. Now, LHP solved the crash safety problem and raised the speed ceiling to 160 km/h, but the trains were still being pulled by a single locomotive. The next shift might just change the very idea how the train moves. Now, on most conventional trains, one locomotive does all the work. For an intercity service, that’s a single engine pulling 16 to 24 coaches that have no power of their own. All the pulling force has to travel through the entire chain and getting the train up to speed takes time. But Vandarat works differently. Half of its coaches have their own motors. A standard 16 coach Vand Barat has eight motor coaches with traction motors tucked under the floor. There’s no need for a separate locomotive. Driver cabs sit at both ends, so the train never needs to be turned around at a terminal either. Since the power is spread across the train instead of sitting in one engine, it accelerates much faster. The government says vandat can cut journey times by up to 45% compared to conventional trains. The time savings come mostly from acceleration. A vandat gets up to cruising speed much faster than a locomotive hall train and breaks more efficiently too. In a 2022 trial, a barat went from standstill to 100 km/h in 52 seconds. The braking system also feeds energy back to the grid saving up to 30% of electrical energy. Now, Vandarat is not a bullet train. The Indian railways calls it semi high speed. Its design speed is 180 km/h with a maximum operating speed of 160 km/h. But even that 160 is rarely achieved. India’s rail tracks were largely built for slower trains and upgrading them to handle higher speeds requires replacing rails, strengthening the track bed, upgrading signaling and fixing curves and gradients. It’s a modern train set designed to deliver meaningful time savings on India’s existing track network. So the first prototype train 18 was built in under 20 months with about 80% content sourced from Indian supply chains. As of April 2026, 79 wand barat services are operational. The sleeper variant was launched in January 2026 on the Guhati Harra route, India’s first long-d distanceance wand bat. It carries 823 bus across 16 coaches and a 24 coach version is in design and 260 sleeper train sets are planned. So, who has been building all of these coaches? For decades, the answer was government entities. ICF Chennai rail coach factory Kaport Tala and modern coach factory Ryareli were the three pillars and they still are. In the last fiscal year ICF produced 37 coaches, RCF produced a record 2383 and MCF hit a record 2025. That’s over 7,000 coaches in a single year. ICF where the Vandarat was born is among the world’s largest rail coach manufacturers. But the ecosystem has broadened beyond them. For instance, a consortium consisting of Barat Heavy Electricals or BHL and Tagar rail systems won the contract for 80 Vandarat sleeper trains worth over rupees 23,000 cr with 35 years of maintenance included. Tagar once a wagon maker has built a Vandarat production line at Uttarpara in West Bengal. And meanwhile, BHL, a government-owned capital goods firm, is now making the power electronics that drive these trains. Then there’s Maida servo drives a Hyderabad based private company that built the propulsion system for the original Wand Barat prototype. It won a rupees 2,211 cr contract from Indian Railways for the electrical systems of 44 Bandai barat train sets with a requirement of at least 75% local content. The Indian railway still sets the standards and creates the demand for these items. But the making of the trains and especially the high value electronics and long-term maintenance is now spread across government companies, listed firms and private specialists. The biggest contracts include not just manufacturing but decades of maintenance afterwards. The union budget’s rolling stock capital outlay for FY202627 is rupes 65,496 cr. That number is a signal to every steel maker, electronics firm, wheel plant and brake supplier in the country. Now, India also exports coaches. The ICF has shipped over 875 coaches to countries including Thailand, Bangladesh, Mozambique, and Sri Lanka. In 2022, officials said India aimed to export Bandai trains to Europe, South America, and East Asia. But as of April 2026, no confirmed overseas sale exists in public record. And the domestic constraint is just as telling. As of 2025, only about 21.8% 8% of India’s tracks which is approximately 23,10 km supports speeds of 130 km/h and above. Vandar’s maximum operating speed of 160 km/h is achieved on just 174 km stretch between Tuglakabad and Agra. Most services run at 130 km/h or below. The trains can do more but the tracks can’t yet. The three eras of India’s passenger coaches tell a story that goes beyond trains. The old coach was a passive steel box pulled by a locomotive. The LHP coach was redesigned so that crashes wouldn’t kill. The bandarat is a train that powers itself. Each shift followed the same pattern. Bring in the technology, learn to make it, then make it better. India’s coaches have come a long way from the blue boxes of the 1960s. The manufacturing base is real. The technology is increasingly homegrown. And the private sector is now part of the story. But the tracks that these trains run on still can’t match what the trains themselves can do. If you prefer reading the daily brief instead of watching the video, check out the link to the newsletter in the description. Coming to the second story, Iran’s entire defense budget is $10 billion or rupes 84,000 cr. The United States defense budget is $850 billion or approximately 71 lakh cr. Yet in the war currently being fought in the Gulf, Iran has the better economics. A rupees 29 lakh drone with a moped engine is draining the world’s most expensive air defense system faster than any factory can replenish it. The side spending more is at least being held to a standstill, if not losing. Cheap drones have broken the economics of modern warfare. Every dollar spent in making them is forcing the other side to spend a hundred shooting them down. And nobody can manufacture the expensive thing fast enough to keep up. This is the central fact of the modern wars being fought today. And it might have something important to say about the rupees 2 lakh cr India just approved for defense procurement. So since late February, Iran has been firing a weapon called the Shahed 136 at US military bases, Saudi oil infrastructure and Israeli cities. It’s not impressive by any conventional measure. It has a small piston engine, the kind you’d find on a moped. Its body is molded from cheap composite material, and it navigates on basic GPS and flies low and slow at roughly the speed of a car on a highway. Each shahed costs about $35,000, or approximately rupes 29 lakh, less than a mid-range SUV. General Hussein Salami, who commanded the Islamic Revolutionary Guard Cops until Israeli strikes killed him last June, was known for boasting about Iran’s weapons manufacturing capabilities. In one speech, he told his audience that Iran had gotten so good at building weapons that it was now about as complicated as making bicycles. At $35,000 a unit, the Shahed 136 suggests he was not far off. Now consider what it stops. The Patriot missile system is one of the most sophisticated weapons ever built. A single Patriot battery, the radar, launchers, control systems costs over $1 billion or approximately rupees 8,400 cr to set up. Each interceptor it fires costs $4 million or rupes 34 cr around 114 times that of the Shahed. It costs them that much more to destroy an Iranian missile. Now, you might think the US is rich enough to absorb that. But here’s the thing. Loheed Martin produced roughly 600 Patriot interceptors in all of 2025 and this was considered a strong production year for them. But in the first week of the Iran conflict, the UAE alone reported being targeted by over 689 drones. Gulf states burned through months of interceptor stockpiles in days. Iran’s strategy is now to drain stockpiles that take years to manufacture faster than they can be replaced. So what Iran is doing to the Gulf is not new. Ukraine lived through this problem and found an even cheaper solution. So Russia had been firing Shahed type drones at Ukrainian cities every night for years. Ukraine could not keep shooting them down with million-dollar missiles that would have bankrupted them. So Ukraine built their own cheap drones. The most common weapon on the Ukrainian front line today is something called a firsterson view or FPV drone. It’s a $400 or rupes 34,000 racing quadcopter strapped with a small explosive steered by a soldier through video goggles directly into an incoming target. Ukraine produced approximately 800,000 drones 2023, 2 million in 2024, and is targeting 5 million this year. Russia watching this announced targets of 1,000 Jan 2 attack drones per day in 2026. Now, drones have changed modern warfare, and soldiers on both sides report never seeing enemy troops on the front line. They only ever encounter drones. And your drone economics decide how long you stand in the war. It’s interesting to see how the world’s most powerful military, the USA, is only now catching up to this reality. See, after World War II, the US spent eight decades and trillions of dollars on the idea that if your weapons are sophisticated enough, one of yours beats many of theirs. The F-35 can evade radar, the Patriot can intercept ballistic missiles, and the aircraft carrier can project force anywhere on Earth. And for most of the 20th century, this worked. Through this approach, the US built a massive military-industrial complex consisting of companies like Loheed Martin, Rathon, and Northrup Grman. It was optimized around making extraordinarily sophisticated weapons slowly and expensively for a military willing to pay whatever it cost. What Ukraine and Iran have exposed is a specific weakness in that logic. When your adversary fires rupees 29 lakh drones faster than you can produce rupees 34 cr interceptors, technological superiority only does so much. Then production speed becomes the decisive advantage and America’s procurement system was built for a different kind of war. The US government’s own auditor, the Government Accountability Office, found in June 2025 that the Pentagon takes an average of 12 years to deliver the first version of a weapon system. The problem ran so deep that Secretary of Defense Pete Hegath stood at the National War College in November 2025 and declared that the defense acquisition system, as you knew it, is dead, announcing the most sweeping procurement overhaul in decades. A system that takes 12 years to field a weapon was never going to produce 1,000 of anything per day. Production speed, it turned out, was the only advantage money could not simply buy. In December 2025, the US military deployed a new weapon for the first time in combat. It’s called Lucas, the lowcost uncrrewed combat attack system, and it was reverse engineered from Iran’s Shahed 136. Sped through the Pentagon’s acquisition process in just 18 months. The Lucas program is the US acknowledging that the current version of modern warfare is one not just on sophistication but also on economics. But the problem is that building cheap drones at scale requires a manufacturing ecosystem the US does not have. Motors, batteries, sensors, electronic speed controllers, the components inside any cheap drone come overwhelmingly from Chinese manufacturers. Even the US with all the money and urgency of a shooting war is discovering it cannot simply wish this industrial base into existence. For India that presents an acute geopolitical problem. In operation Synindor, India used precision Israeli drones to attack Pakistani air defense systems. And these drones cost close to $1 million or rupees 8.4 cr each. Pakistan meanwhile used Turkish Barakars and Chinese CH4s. These are cheaper, mass- prodduced, backed by their allies Turkey and China. A significant cost advantage over the drones India acquired. Operation Synindhur may not have lasted for too long for this to matter. But when a war gets stretched over years, the math gets hefty. Now, India does have a cheap drone. The Nagastra 1, which costs about $500 or rupes 42,000. Idea Forge founded by IIT Bombay Engineers holds approximately 50% of our domestic UAV market and a rupees 10,000 cr dr drone PLI is also being proposed for the coming budget. But inside every cheap Indian drone right now is a core dependency. The camera and sensor payload which allows a drone to see its target, track it and navigate to hit it accounts for 60 to 70% of total drone cost. India does not manufacture it at scale, relying primarily on imports from China. China controls the global drone production ecosystem not through any military strategy, but because it spent 20 years building the world’s best commercial drone industry. DJI, which holds 70% of the global commercial drone market and was banned by the US Army in 2017, is just the most visible face of an ecosystem that now underpins every military on Earth. It goes without saying that in a conflict with China or even Pakistan with Chinese support, India loses a connection to the Chinese component supply chain immediately. Ukraine, for instance, runs its entire drone industry on Chinese components to this day, 3 years into the war. The supply has not stopped, but only because China has chosen not to stop it. For India, though, that’s a geopolitical risk we probably can’t afford for long. We’ll have to build the capability ourselves. In March, India’s Defense Acquisition Council approved a rupees 2 lakh crore or $25 billion package, our largest defense procurement ever. It’s a broad push to upgrade what modern warfare is validating. More S400 batteries, 60 new remotely piloted strike aircraft. But will this package be enough to make us self-sufficient on time? After all, China already has a massive cost advantage through its inescapable supply chain. And that advantage only compounds itself. Now coming to the tidbits. Russian oil sales to India are expected to stay near record levels at over 2 million barrels per day in April May following US sanctions waiver renewal with March imports hitting record 2.25 million BBD or 50% of India’s total with Indian refiners paying $7 to9 premium to Brent for deliveries. Coming to the next tidbit, Tata Alexi reported Q4 profit of rupes 2.2 billion up 27.8% 8% year-on-year ending a 54er decline streak driven by transportation segments 7% constant currency growth and media units 2.3% rise with overall revenue at rupees 9.94 billion declaring rupees 75 dividend per share coming to the final tidbit JP Morgan expects China’s property market turnaround to drive mainland stocks above emerging market peers citing Hong Kong real estate recovery spillover to tier one cities wealth effect from equity rebound and housing affordability at 2016 levels with March showing slowest home price decline in a year. That’s all the news I have for you. Thank you so much for watching and see you in the next one.