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There is a preparation to significantly increase the expenditure on security of Indian Railways in the FY27 budget of the Central Government. According to media reports, the expenditure on railway safety may exceed Rs 1.3 lakh crore. If this happens, it will be the biggest budget ever for railway security. In FY27, almost half of the total capex of Railways can be spent only on safety. At the same time, the total railway capex is also estimated to increase by about 10% from Rs 2.52 lakh crore this year to Rs 2.75 lakh crore. This increase is not just a strategy but is considered a necessary step after major train accidents.

Companies making armor systems are expected to directly benefit from this increased budget. Armor plays an important role in preventing train accidents and is also a major part of the government's Mission Raftaar. Kavach is a completely indigenous technology, which has been designed, developed and patented in India. It is owned by Indian Railways and three OEM companies. This system automatically applies brakes when the danger signal is crossed or the speed exceeds the prescribed speed, thereby preventing accidents.

How does armor prevent collisions?

Indian Railways is planning to install Kavach in a phased manner on more than 40,000 km of the network of about 85,000 km. Currently the focus is on high-density and high-speed routes, which are targeted to be completed by 203032. According to Concord Control Systems, the potential of this market is about Rs 50,000 crore. Increasing emphasis on railway safety and higher budget may be beneficial for some selected companies. Let us look at three such companies.

HBL Engineering: The biggest player in armor

Kavach is HBL Engineering's flagship indigenous train anti-collision system. It has been made for Indian Railways. HBL took about 20 years to prepare it. The journey from idea to profit was a long one. Its first track trial took place in October 2012. The old version 3.2 had protection up to 110 km/h, while version 4.0 provides protection at speeds up to 160 km/h. HBL demonstrated v4.0 in 2024 and became the first company to receive its certification in May 2025. By the end of 2025, only two companies were qualified for v4.0, which includes HBL.

Tremendous jump in order book

Orders remained slow for some time due to the transition from v3.2 to v4.0 in FY25, but the situation turned around by Q2 FY26. The management called it a flood of orders. HBL has orders worth about Rs 4,000 crore, which include 6,980 km of track, 2,425 locos, 758 stations and 460 level crossings.

Kavach is currently a major source of income for HBL. The company expects armor sales of Rs 1,3001,500 crore every year from FY26 to FY28. It may take more than 5 years to armor the entire railway network, so HBL is likely to benefit in the long run. However, earnings from Kavach may decline after FY28, hence HBL is preparing to expand its Train Management System (TMS) and Centralized Train Control business.

Kernex Microsystems: Pure Player in Railway Safety

Kernex is a company that manufactures and installs railway safety systems. It does the complete work from design to installation. The Armor program is the biggest strength of Kernex. Kavach has been jointly developed by Kernex, Medha Servo Drives and HBL Engineering. These three companies are approved to design and deploy it.

Entry into this sector is difficult because the highest safety standards (SIL-4) are required. In October 2025, Kernex got the approval of Kavach v4.0, which is expected to complete projects faster and increase earnings in future.

Order book worth Rs 2,500 crore

As of September 30, 2025, Kernex's order book was Rs 2,563 crore, which shows earnings of more than 10 years. This includes an order worth Rs 1,730 crore to supply 2,500 TCAS units to Chittaranjan Locomotive Works. However, there is a risk that Kernex is completely dependent on Indian Railways. In a tender system, the lowest bidder often gets the work, which can put pressure on margins.

Concord Control Systems: a low-cost contender

Concord recently received approval for the technical prototype of Kavach v4.0. With this the company can now move towards field trials and commercial deployment. Concord is in the armor business through its subsidiary Progota India (46.5% stake). As a developmental vendor, Progota can now bid for up to 20% stake in the Kavach v4.0 tender.

Concord's armor system is counted among the lowest cost SIL-4 systems in the world. Track side installation is around Rs 50 lakh per km and loco fitment is around Rs 70 lakh per unit. EBITDA margin is expected to be up to 2530%. The company has received the first trial order of Rs 19.5 crore, which is on a 53 km section of South Central Railway. Full certification is expected after completion of the trials. As of December 26, 2025, Concord's order book was more than Rs 450 crore, which shows earnings of more than 4 years.

Valuation and further pictures

Valuations of Kavach-related stocks have fallen in recent months, but the 67-year opportunity is still big. HBL looks strong due to scale and diversification. Kernex armor is a direct bet, but the risk is also high. Concord is a small company, but can surprise by moving towards becoming a system partner. However, this is a government order business, so it will be necessary to keep an eye on risks like fluctuations in orders and technology upgrades.

Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.